Preliminary Official Statement Dated August 24, 2016

PRELIMINARY OFFICIAL STATEMENT DATED AUGUST 24, 2016

REFUNDING ISSUE RATINGS: See “Ratings” herein In the opinion of DeCotiis, FitzPatrick & Cole, LLP, Bond Counsel, assuming continuing compliance by the City of Newark (the “City”) with certain covenants described herein, under current law, interest on the Bonds is not includable in gross income for federal income tax purposes and is not an item of tax preference under Section 57 of the Internal Revenue Code of 1986, as amended (“Code”), for purposes of computing the federal alternative minimum tax; however, interest on the Bonds held by corporate taxpayers is included in the relevant income computation for calculation of the federal ds described herein, the City will City the herein, ds described alternative minimum tax as a result of the inclusion of interest on the Notes in “adjusted current earnings”. No opinion is expressed regarding other federal tax consequences arising with respect to the Bonds. Further, in the opinion of Bond Counsel, under current law interest on the Bonds and any gain on the sale thereof are not includable as gross income under the New Jersey Gross Income Tax Act. See “TAX MATTERS” herein.

CITY OF NEWARK in the County of Essex, New Jersey $25,000,000 QUALIFIED GENERAL OBLIGATION OPEN SPACE BONDS, SERIES 2016 (RIVERFRONT PARK) inal. inal. the Bon Upon the sale of

Dated: Date of Delivery Due: September 15, as shown on inside front cover

The $25,000,000 aggregate amount of Qualified General Obligation Open Space Bonds, Series 2016 (Riverfront Park) (the “Bonds”) will be issued as fully registered Bonds and, when issued, will be registered in the name of and held by Cede & Co., as nominee for the Depository Trust Company (“DTC”). Purchases of the Bonds will be made in book-entry-only form (without certificates) in denominations of $5,000 or multiples of $1,000 in excess thereof. So long as DTC, or its nominee Cede & Co., is the registered owner of the Bonds, payments of the principal of and interest on the Bonds are to be made directly to Cede & Co., which is to remit such payments to DTC participants, which in turn is to remit such payments to the beneficial owners of the Bonds (see “BOOK-ENTRY ONLY SYSTEM”

y Official Statement is Statement y Official deemed f herein).

The principal of the Bonds is payable on September 15 in the years set forth on the inside front cover of this Official Statement, and interest on the Bonds is payable semiannually on March 15 and September 15 in each year, commencing March 15, 2017, to the registered owners thereof at their respective addresses as they appear on the registration books of TD Bank, National Association, as bond registrar and paying agent (the “Paying Agent”), until the City’s obligations with respect to payment of the principal of the Bonds shall be discharged. Provided DTC or its nominee Cede is the registered owner of the Bonds, payment of the principal, redemption premium, if any, and interest on the Bonds will be made directly to DTC or its nominee, which is obligated to remit such principal, redemption premium and interest to DTC Participants, as defined herein. DTC Participants and Indirect Participants, as defined herein, will be responsible for remitting such payments to the beneficial owners of the Bonds. See, “BOOK-ENTRY ONLY SYSTEM”, herein.

The Bonds are subject to redemption prior to maturity as set forth herein.

The Bonds are authorized pursuant to a bond ordinance numbered 6PSF – A(s)16-0607 duly adopted by the Municipal Council of the City on May 26, 2016, approved by the Mayor and published as required by law on June 4, 2016 and a bond resolution authorizing the issuance and sale of the Bonds on a competitive basis adopted on August 23, 2016.

The Bonds constitute general obligations of the City of Newark, in the County of Essex, New Jersey (the “City”), and the full faith and credit and unlimited taxing power of the City are pledged to the payment of the principal of and interest on the Bonds. The Bonds are also are entitled to the benefits of the Municipal Qualified Bond Act, Title 40A of the New Jersey Statutes, Section 40A:3-1, et seq., as eption of the specific information permitted to be omitted by Rule 15c2-12 of the Securities and Exchange Commission. The City has authorized distribution s and others. In accordance with Rule 15c2-12, this Preliminar this 15c2-12, Rule with accordance In others. s and

ys following such sale. such following ys amended (the “Municipal Qualified Bond Act”, such bonds being called “Qualified Bonds”).

The Bonds are not a debt or obligation, legal, moral, or otherwise, of the State, or any county, municipality or political subdivision thereof, other than the City.

The Bonds are offered when, as and if issued by the City and delivered to the purchaser, subject to the approval of legality by DeCotiis, FitzPatrick & Cole, LLP, Bond Counsel, and other conditions described herein. Certain legal matters will be passed on for the City by Willie Parker, Esq., Corporation Counsel. It is expected that the Bonds will be available for delivery on or about September 21, 2016. The Bonds are to be delivered through the facilities of DTC in New York, New York. t within seven (7) business da business (7) seven t within tatement, complete with the exc This cover page contains certain information for quick reference only. It is not a summary of this issue. Investors must read the entire Official Statement to obtain information essential to the making of an informed investment decision.

ELECTRONIC PROPOSALS FOR THE PURCHASE OF THE BONDS WILL BE RECEIVED ON THURSDAY, AUGUST 31, 2016 IN ACCORDANCE WITH A NOTICE OF SALE, DATED AUUGUST 24, 2016, RELATING TO THE SALE OF THE BONDS.

Dated: August __, 2016 deliver a final Official Statemen This is a Preliminary Official S of this Preliminary Official Statement to prospective purchaser

CITY OF NEWARK in the County of Essex, New Jersey $25,000,000 QUALIFIED GENERAL OBLIGATION OPEN SPACE BONDS, SERIES 2016 (RIVERFRONT PARK)

Maturity Principal Interest Maturity Principal Interest (September 15) Amount Rate Yield CUSIP* (September 15) Amount Rate Yield CUSIP* 2017 $1,000,000 2027 $1,300,000 2018 1,000,000 2028 1,355,000 2019 1,000,000 2029 1,420,000 2020 1,005,000 2030 1,490,000 2021 1,040,000 2031 1,560,000 2022 1,070,000 2032 1,635,000 2023 1,110,000 2033 1,720,000 2024 1,150,000 2034 1,805,000 2025 1,195,000 2035 1,900,000 2026 1,245,000

* "CUSIP" is a registered trademark of the American Bankers Association. CUSIP numbers are provided by Standard & Poor’s, CUSIP Service Bureau, a division of The McGraw-Hill Companies, Inc. The CUSIP Numbers listed above are being provided solely for the convenience of Bondholders only at the time of issuance of the Bonds and the City does not make any representations with respect to such numbers or undertake any responsibility for their accuracy now or at any time in the future. The CUSIP number for a specified maturity is subject to being changed after the issuance of the Bonds as a result of various subsequent actions including, but not limited to, a refunding in whole or in part of such maturity or as a result of the procurement of secondary market portfolio insurance or other similar enhancement by investors that is applicable to all or a portion of certain maturities of the Bonds.

CITY OF NEWARK, IN THE COUNTY OF ESSEX, NEW JERSEY

MAYOR

Ras J. Baraka

CITY COUNCIL MEMBERS

Mildred C. Crump, President, At-Large Augusto Amador, Vice-President, East Ward Gayle Chaneyfield Jenkins, Central Ward Carlos M. Gonzalez, At-Large John Sharpe James, South Ward Joseph A. McCallum Jr., West Ward Eddie Osborne, At-Large Luis A. Quintana, At-Large Anibal Ramos, Jr., North Ward

BUSINESS ADMINISTRATOR

John Kelly

DIRECTOR OF FINANCE AND CHIEF FINANCIAL OFFICER

Danielle Smith

CITY CLERK

Kenneth Louis

CORPORATION COUNSEL

Willie Parker, Esq.

AUDITORS

Samuel Klein and Company Certified Public Accountants Newark, New Jersey

BOND COUNSEL

DeCotiis, Fitzpatrick & Cole, LLP Teaneck, New Jersey

FINANCIAL ADVISOR

NW Financial Group, LLC Hoboken, New Jersey

No dealer, broker, salesperson or any other person has been authorized by the City of Newark, in the County of Essex, New Jersey (the “City”) or the Underwriter to give any information or to make any representations, other than those contained in this Official Statement, and, if given or made, such other information or representations must not be relied upon as having been authorized by the foregoing. The information contained herein has been provided by the City and other sources deemed reliable; however, no representation or warranty is made as to its accuracy or completeness and such information is not to be construed as a representation or warranty by the Underwriter or, as to information from sources other than the Underwriter, by the City. The information and expressions of opinion herein are subject to change without notice, and neither the delivery of this Official Statement nor any sale hereunder shall, under any circumstances, create any implication that there has been no change in any of the information herein since the date hereof, or the date as of which such information is given, if earlier.

References in this Official Statement to laws, rules, regulations, resolutions, agreements, reports and documents do not purport to be comprehensive or definitive. All references to such documents are qualified in their entirety by reference to the particular document, the full text of which may be inspected at the offices of the City during normal business hours.

This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds in any jurisdiction in which it is unlawful for any person to make such an offer, solicitation or sale. No dealer, broker, salesman or other person has been authorized to give any information or to make any representations other than as contained in this Official Statement. If given or made, such other information or representations must not be relied upon as having been authorized by the City.

Certain statements included or incorporated by reference in this Official Statement, including specifically (but not limited to) the statements contained under the headings "INTRODUCTION - Future Financing Plans", “CITY FINANCIAL CONDITION AND STATE SUPERVISION”, "RISK FACTORS" and “APPENDIX A – CITY FINANCIAL SCHEDULES – 2010 Budget and Fiscal Initiatives of the City,” “-2011 Budget”, “-2012 Budget”, “-2013 Budget”, “-2014 Budget”, “-2015 Budget”, “-2016 Budget and Proposed Fiscal Initiatives of the City” constitute projections or estimates of future events, generally known as forward-looking statements. These statements are generally identifiable by the terminology used, such as "plan", "expect", "estimate", "budget" or similar words. These forward-looking statements are based on the beliefs of, and assumptions made by, City officials and on information currently available to City officials. The achievement of certain results or other expectations contained in such forward-looking statements involves known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements described to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to, items described under the above-referenced headings. Other than as may be required by law, the City does not plan to issue any updates or revisions to these forward-looking statements if or when its expectations, or events, conditions or circumstances on which such statements are based, occur.

The Underwriter for the Bonds may offer and sell the Bonds to certain dealers, dealer banks, and banks acting as agent at prices lower than the public offering price or higher than the yield, as applicable, stated on the cover hereof. Such public offering prices or yields, as applicable, may be changed from time to time by the Underwriter.

IN MAKING ANY INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE CITY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

TABLE OF CONTENTS

Section Page INTRODUCTION ...... 1 Authorization and Purpose for the Bonds ...... 1 City Financial Condition and State Supervision ...... 1 Future Financing Plans ...... 2 CITY FINANCIAL CONDITION AND STATE SUPERVISION ...... 3 2013 Operational Deficit and State Supervision of City Finances ...... 3 2014 Operational Deficit and 2015 City Budget ...... 4 2016 City Budget ...... 4 DESCRIPTION OF THE BONDS ...... 4 General ...... 4 Redemption ...... 5 Notice of Redemption ...... 5 BOOK-ENTRY ONLY SYSTEM ...... 5 Discontinuation of Book-Entry Only System ...... 7 SECURITY FOR THE BONDS ...... 7 General Obligation Pledge ...... 7 Municipal Qualified Bond Act ...... 8 MUNICIPAL QUALIFIED REVENUES/DEBT SERVICE COVERAGE RATIOS ...... 8 RISK FACTORS ...... 8 NO DEFAULT ...... 10 LITIGATION ...... 10 TAX MATTERS ...... 11 OFFICIAL STATEMENT ...... 12 LEGALITY FOR INVESTMENT ...... 13 MUNICIPAL BANKRUPTCY ...... 13 BONDHOLDERS' RISK ...... 14 APPROVAL OF LEGALITY ...... 14 CERTIFICATES OF THE CITY ...... 14 CONTINUING DISCLOSURE ...... 14 FINANCIAL STATEMENTS ...... 16 FINANCIAL ADVISOR ...... 16 RATINGS ...... 16 UNDERWRITING ...... 16 MISCELLANEOUS ...... 17

APPENDIX A – CERTAIN GENERAL INFORMATION CONCERNING THE CITY OF NEWARK

APPENDIX B – CITY OF NEWARK AUDITOR’S REPORT AND FINANCIAL STATEMENTS

APPENDIX C – FORM OF LEGAL OPINION

APPENDIX D – FORM OF CONTINUING DISCLOSURE CERTIFICATE

[ THIS PAGE INTENTIONALLY LEFT BLANK ]

OFFICIAL STATEMENT OF THE CITY OF NEWARK IN THE COUNTY OF ESSEX, NEW JERSEY

$25,000,000 QUALIFIED GENERAL OBLIGATION OPEN SPACE BONDS, SERIES 2016 (RIVERFRONT PARK)

INTRODUCTION

This Official Statement, which includes the cover page hereof and appendices attached hereto, has been prepared by the City of Newark, in the County of Essex, New Jersey (the “City”) in connection with the sale and issuance of $25,000,0000 aggregate amount of General Obligation Open Space Bonds, Series 2016 (Riverfront Park) (the “Bonds”). This Official Statement has been approved by the Municipal Council, and executed by and on behalf of the City by the Director of Finance of the City and has been authorized to be distributed in connection with the sale of the Bonds.

This Official Statement contains specific information relating to the Bonds including their general description, certain matters affecting the financing, certain legal matters, historical financial information and other information pertinent to this issue. This Official Statement should be read in its entirety.

All financial and other information presented herein has been provided by the City from its records, except for information expressly attributed to other sources. The presentation of information, including tables of receipts and disbursements, is intended to show recent historical information and, but only to the extent specifically provided herein, certain projections of the immediate future, and is not necessarily indicative of future or continuing trends in the financial position or other affairs of the City.

Authorization and Purpose for the Bonds

The Bonds are authorized and are to be issued pursuant to the Local Bond Law of the State of New Jersey, N.J.S.A. 40A:2-1 et seq. and by the following bond ordinance of the City as set forth below. The Local Finance Board approved the adoption of the bond ordinance and the issuance, maturity schedule and qualification of the Bonds under the Municipal Qualified Bond Act, Title 40A of the New Jersey Statutes, Section 40A:3-1, et seq., as amended (the “Municipal Qualified Bond Act”) on May 11, 2016. Additionally, on August 23, 2016, the City adopted a resolution authorizing the issuance and sale of the Bonds.

Amount Ordinance and Adoption Date Purpose(s) to be Issued

6PSF – A(s) May 26, 2016 the acquisition of land and the acquisition $25,000,000 (16-0607) and installation of capital improvements, as applicable, for the expansion of Riverfront Park

Total for the Bonds.....………………………………………………………………………………..…… $25,000,000

The City will apply the proceeds from the sale of the Bonds to pay a portion of the costs related to the expansion of Newark Riverfront Park in the City and to pay costs of issuance in connection with the sale of the Bonds.

City Financial Condition and State Supervision

See the heading “CITY FINANCIAL CONDITION AND STATE SUPERVISION” below for a discussion of the City’s current financial condition and proceedings of the New Jersey Local Finance Board (the “Local Finance Board”

1 which resulted in the City being placed under the fiscal supervision of the State of New Jersey (the “State”). By virtue of such supervision, the issuance of the Bonds is subject to the approval of the Director (the “Director”) of the Division of Local Government Services in the New Jersey Department of Community Affairs (the “Division”). Such approval is a condition precedent to the award of the Bonds to the Underwriter. The City anticipates that the Director will approve the sale of the Bonds on August 31, 2016.

The City filed its Annual Financial Statement for the 2015 fiscal year, representing the City’s 2015 unaudited financial statements, with the MSRB on March 17, 2016. The City’s 2015 unaudited financial statements revealed an approximately $29.5 million current fund surplus for the 2015 fiscal year.

Future Financing Plans

The City has adopted bond ordinances authorizing various water and sewer projects eligible for the annual financing program of the New Jersey Environmental Infrastructure Trust (the “NJEIT”). The City intends to embark upon an approximately $460 million long-term capital improvement program over the next 10 years for its water and sewer infrastructure, commencing with the above financings. The City expects to close an $18 million Construction Financing Program Loan with NJEIT on June 27, 2016. Proceeds will be used to fund water main rehabilitation projects within the City.

In December 2015, the City issued $17,599,000 aggregate principal amount of General Obligation Notes consisting of (i) $13,833,000 Tax Appeal Refunding Notes, Series 2015B (the “Series 2015B Notes”), (ii) $1,378,000 Special Emergency Notes, Series 2015C (the “Series 2015C Notes”), and (iii) $2,388,000 Refunding Notes, Series 2015D (the “Series 2015D Notes”). Upon maturity of such notes on December 6, 2016, the City presently expects to refund approximately $10,548,000 of the Series 2015B Notes and approximately $1,193,000 of the Series 2015D Notes (together with issuance costs), with other note issues. The City expects to retire the remaining $3,285,000 of the Series 2015B Notes, the remaining $1,378,000 of the Series 2015C Notes and the remaining $1,195,000 of the Series 2015D Notes from appropriations to be budgeted.

The City expects to issue approximately $10 million in general obligation refunding bonds in the fourth quarter of 2016.

The City intends to issue refunding bonds in the third quarter of 2016 to refund a temporary emergency appropriation in the amount $16.7 million in connection with various prior year health care expenses.

The City may, from time to time, issue revenue bonds with respect to redevelopment projects to be undertaken within the City. Certain of such bonds may be issued as “redevelopment area bonds”, whereby certain service charges collected by the City in lieu of property taxes would be pledged as security for the payment of such bonds. Absent a separate municipal guaranty, such bonds would not be considered to be debt of the City, but would be payable solely from such pledged service charges.

The City has received approval from the Local Finance Board for the issuance of redevelopment area bonds in the amount of $25 million. Such bonds will be secured by annual service charges collected by the City with respect to a proposed Public Service Electric and Gas (“PSE&G”) switching station in the City’s West Ward. The proceeds of such financing will be used to fund all or a portion of certain redevelopment projects within the City. Such financing is expected to close in the fourth quarter of 2016. Finally, the City may authorize certain “economic redevelopment and growth grants” with respect to certain redevelopment projects to be undertaken within the City, whereby certain incremental receipts of taxes and other revenues would be pledged to the payment of revenue bonds, which may be issued by the City or another eligible issuer.

The City annually budgets for the payment of property tax refunds payable in respect of prior year taxes, but has on occasion (including in 2008, 2011, 2014 and 2015) received Local Finance Board approval for the issuance of tax appeal refunding notes to fund such payments. The City may issue additional tax appeal refunding notes in 2016. The issuance of such tax appeal refunding notes and repayment schedule will be subject to approval by the Local Finance Board.

Finally, the City may issue additional general obligation bonds and/or notes from time to time to finance capital needs of the City and the Newark Public Schools.

THERE CAN BE NO ASSURANCE THAT THESE FUTURE FINANCING PLANS WILL BE COMPLETED.

CITY FINANCIAL CONDITION AND STATE SUPERVISION

2013 Operational Deficit and State Supervision of City Finances

The City’s Audited Financial Statements for the year ended December 31, 2013 (the “2013 Audited Financial Statements”) reflected an operational deficit of approximately $30.1 million, representing approximately 8% of the total amount of taxes levied. This operational deficit resulted chiefly from a net reduction in realized revenues of approximately $43.8 million from the amount budgeted (taking into account the receipt of non-budget revenues of approximately $2.3 million), which represents approximately 6.7% of the City’s total budgeted current fund revenues for 2013. The principal budget categories contributing to the shortfall in realized revenues were “Total Amount to be Raised by Taxes for Support of Municipal Budget” (approximately $24.4 million), “Total Miscellaneous Revenues Anticipated” (approximately $18.1 million), “Receipts from Delinquent Taxes” (approximately $2.1 million) and “Total Surplus Anticipated” (approximately $1.5 million). The 2013 Audited Financial Statements were filed with the Municipal Securities Rulemaking Board (the “MSRB”) on January 26, 2015 and are included in Appendix B herein. See “FINANCIAL STATEMENTS” herein.

The City faced extraordinary challenges to the adoption of a balanced cash basis budget for its 2014 fiscal year. At the joint request of the City and the Division, on October 6, 2014 the Superior Court of New Jersey, Law Division entered a judgment that there had been a gross failure to comply with the provisions of the Local Budget Law (N.J.S.A. 40A:4-1 et seq.) (specifically, the inability of the City to prepare a cash basis budget for fiscal year 2014) which substantially jeopardized the fiscal integrity of the City. Such judgment provided the basis for the Director of the Division to convene a public hearing of the New Jersey Local Finance Board (the “Local Finance Board”), which was held on October 8, 2014. At the conclusion of such hearing, the Local Finance Board adopted a resolution determining that the City be subject to supervision pursuant to Article 4 of the Local Government Supervision Act of 1947, P.L. 1947, c.151, as amended by P.L. 1981, c.211 and set forth as N.J.S.A. 52:27BB-54 et seq. (the “Supervision Act”), and enumerating the specific statutory powers to be assumed by the Director and/or the Local Finance Board in respect of the City’s fiscal affairs. The resolution became effective on October 9, 2014 following approval by certain State cabinet officers, whereupon the State’s fiscal supervision of the City took effect.

The terms of State supervision over the City’s finances provide generally for Director approval and/or supervision over, among other things, the issuance and liquidation of bonds and other obligations, municipal expenditures and appropriations, appointment and dismissal of managers, and supervision of revenue administration. The Director may also act as controller, and provide for the appointment of a fiscal control officer for the municipality. The Director may also authorize the City to exceed certain statutory spending limitations, liquidate or refinance current debt, and appropriate less than the full amount required to be included in the budget for certain deferred charges and statutory expenditures. The specific supervisory powers are set forth in N.J.S.A. 52:27BB-57, -58, -60, -61, -62, -66, -66.1, -73, 74, -75, -76, -77, -78, -79, -80, -81, -82, -83, -84, -85, -86, -87, -88, -89 and -90. To remain effective, the Local Finance Board resolution (and cabinet officer approvals) that placed the City under supervision must be renewed each year.

In addition to State supervision, the City was subject to a Memorandum of Understanding with the Division in respect of the $10 million in Transitional Aid received in fiscal year 2014 (the “2014 MOU”). The 2014 MOU required the City to obtain the prior consent of the Director before taking certain actions, including (but not limited to) new hiring, employee raises and promotions, expansion of municipal services, certain contracts and bond authorizations, and granting of tax abatements. The City was also required to adhere to certain contracting procedures, report to the Division on its progress toward implementing recommendations from State-commissioned performance audits, and present a transition plan detailing how the City intends to eliminate its reliance on special State assistance. The 2014 MOU remained in effect through December 31, 2015.

In 2015, the Division selected McEnerney Brady & Company LLC to provide ongoing oversight over the City’s Finance Department. Such functions are in addition to the supervisory responsibilities of the Director (or any fiscal control officer) under the Supervision Act and under the 2014 MOU.

2014 Operational Deficit and 2015 City Budget

The City’s Audited Financial Statements for the fiscal year ended December 31, 2014 reflected an operational deficit of approximately $22.3 million, representing approximately 5.8% of the total amount of taxes levied. This operational deficit resulted chiefly from a net reduction in realized revenues of approximately $12.9 million from the amount budgeted (taking into account the receipt of non-budget revenues of approximately $1.7 million), interfund advances originating in 2014 in the amount of $18.7 million, and the elimination of invalid prior year bank reconciliation items in the amount of $7.1 million. The 2014 Audited Financial Statements were filed with the MSRB on August 12, 2015 and are included in Appendix B herein. See APPENDIX B – “AUDITOR’S REPORT, FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS” herein.

The City continued to face challenges to the adoption of a balanced cash basis budget in 2015. Under the powers conferred under the Supervision Act, on September 22, 2015 the Local Finance Board adopted a balanced 2015 operating budget, reflecting, among other things, the receipt of $10 million in Transitional Aid from the State, an approximately 8.67% increase in the City’s municipal property tax levy and a ten-year amortization of the 2013 deficit and 2014 deficit.

In connection with the City’s receipt of $10 million in Transitional Aid from the State in 2015, the City entered into another Memorandum of Understanding with the Division (the “2015 MOU”). As with the 2014 MOU, the 2015 MOU requires the City to obtain the prior consent of the Director before taking certain actions, including (but not limited to) new hiring, employee raises and promotions, expansion of municipal services, certain contracts and bond authorizations, and granting of tax abatements. The City is also required to adhere to certain contracting procedures, report to the Division on its progress toward implementing recommendations from State-commissioned performance audits, and present a transition plan detailing how the City intends to eliminate its reliance on special State assistance. The 2015 MOU shall continue in effect until the City adopts a budget that does not have a structural imbalance that is greater than 5% as determined by the Director, and may be replaced by a subsequent Memorandum of Understanding in respect of any Transitional Aid as may be awarded in connection with its FY2016 budget. The City currently anticipates that it will remain under State supervision for the foreseeable future.

2016 City Budget

The City’s 2016 budget was introduced by the Municipal Council on May 18, 2016. Such introduced budget reflects, among other things, a 2% increase in the City’s municipal property tax levy, the receipt of $10 million in Transitional Aid from the State and the continued amortization of the 2013 deficit and 2014 deficit over a ten-year period. The City presently expects to adopt a balanced cash basis budget for its 2016 fiscal year during the third quarter of 2016.

DESCRIPTION OF THE BONDS

General

The Bonds are dated the date of delivery, shall bear interest payable semiannually on March 15 and September 15 of each year (each an “Interest Payment Date”), commencing March 15, 2017, at the rates per annum and shall mature on September 15 in the years as set forth on the inside front cover of this Official Statement.

The Bonds will be issued as fully registered book-entry bonds, and registered in the name of Cede & Co. (“Cede”), as nominee for The Depository Trust Company, New York, New York (“DTC”), which will act as securities depository for the Bonds under its book-entry-only system (the “DTC Book-Entry-Only System”). An individual purchaser may purchase a Bond in book-entry form (without certificates) in denominations of $5,000, or in multiples of $1,000 thereof. Provided DTC, or its nominee Cede, is the registered owner of the Bonds, the principal, redemption premium, if any, of, and interest on, the Bonds will be paid to DTC or Cede, as its nominee. See, “The DTC Book-Entry- Only System,” herein. In the event the Bonds are no longer subject to the DTC Book-Entry-Only System, the principal and redemption premiums, if any, on the Bonds will be payable upon surrender of the respective Bonds at a designated corporate trust office of the Paying Agent. Interest on the Bonds will then be paid by check or bank draft mailed by the Paying Agent to the registered owner thereof as of the March 1 and September 1 preceding any interest payment date at their addresses on file with the Registrar. TD Bank, National Association, Cherry Hill, New Jersey, will act as the paying agent and bond registrar for the Bonds (the “Paying Agent”).

Redemption

Optional Redemption. The Bonds maturing on or before September 15, 2026 shall not be subject to redemption prior to their respective maturity dates. The Bonds maturing on and after September 15, 2027 shall be subject to redemption prior to their respective maturity dates, on or after September 15, 2026 at the option of the City, upon notice as herein described, as a whole or in part from time to time and if in part, by lot within such maturity from maturities selected by the City, on any date, at a redemption price equal to 100% of the principal amount thereof (the “Redemption Price”) and accrued interest thereon to the date of redemption.

Notice of Redemption

When the Bonds have been selected for redemption pursuant to any provision of the Resolution, the Paying Agent shall give written notice of the redemption of such Bonds in the name of the City, which notice shall set forth: (i) the date fixed for redemption, (ii) the Redemption Price to be paid, (iii) that such Bonds will be redeemed at a designated office of the Paying Agent, (iv) if less than all of such Bonds of a series and maturity shall be called for redemption, the distinctive numbers and letters, if any, of such Bonds to be redeemed, and (v) in the case of Bonds to be redeemed in part only, the portion of the principal amount thereof to be redeemed. Such notice shall further state that on the redemption date there shall become due and payable the Redemption Price of all Bonds to be redeemed, together with interest accrued thereon to the redemption date, and that, from and after such date, interest thereon shall cease to accrue. If any Bond is to be redeemed in part only, the notice of redemption that relates to such Bond shall state also that on or after the redemption date, upon surrender of such Bond, the Holder thereof shall be entitled to a new Bond or Bonds, bearing interest at the same rate and in aggregate principal amount equal to the unredeemed portion of such Bond.

The notice required to be given by the Paying Agent shall be sent by first class mail to the registered owners of the Bonds to be redeemed, at their addresses as they appear on the Bond registration books of the City, not less than thirty (30) nor more than sixty (60) days prior to the redemption date. The failure to give notice of the redemption of any Bond or portion thereof to the registered owner of such Bonds shall not affect the validity of the proceedings for the redemption of any Bonds for which notice of redemption has been given in accordance with the provisions of the Resolution. BOOK-ENTRY ONLY SYSTEM

The description which follows of the procedures and recordkeeping with respect to beneficial ownership interest in the Bonds, payment of principal and interest and other payments on the Bonds to Direct and Indirect Participants (defined below) or Beneficial Owners (defined below), confirmation and transfer of beneficial ownership interests in the Bonds and other related transactions by and between DTC, Direct Participants and Beneficial Owners, is based on certain information furnished by DTC to the City. Accordingly, the City does not make any representations as to the completeness or accuracy of such information.

DTC will act as securities depository for the Bonds. The Bonds will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an

5 authorized representative of DTC. One fully-registered Bond certificate for each maturity of each series of the Bonds will be issued for the Bonds, in the aggregate principal amount of such maturity, and will be deposited with DTC.

DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation, and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

Purchases of the Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in the Bonds, except in the event that use of the book-entry system for the Bonds is discontinued.

To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders, defaults, and proposed amendments to the Bond documents. For example, Beneficial Owners of Bonds may wish to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

Redemption notices shall be sent to DTC. If less than all of the Bonds, within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest in each Direct Participant in such issue to be redeemed.

Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Bonds unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an

Omnibus Proxy to the City as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Bonds are credited on the record date (identified in a listing attached to the Omnibus Proxy).

Redemption proceeds, principal, and interest payments on the Bonds will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the Paying Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC nor its nominee, the Paying Agent, or the City, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, principal, and interest payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of the City or the Paying Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

DTC may discontinue providing its services as depository with respect to the Bonds at any time by giving reasonable notice to the City and/or its Paying Agent. Under such circumstances, in the event that a successor depository is not obtained, Bond certificates are required to be printed and delivered.

The City may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository). In that event, Bond certificates will be printed and delivered.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that the City believes to be reliable, but the City takes no responsibility for the accuracy thereof.

THE CITY WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO SUCH DTC PARTICIPANTS OR THE PERSONS FOR WHOM THEY ACT AS NOMINEES WITH RESPECT TO THE PAYMENTS TO OR PROVIDING OF NOTICE FOR THE DTC PARTICIPANTS, OR THE INDIRECT PARTICIPANTS, OR BENEFICIAL OWNERS.

SO LONG AS CEDE & CO. IS THE REGISTERED OWNER OF THE BONDS, AS NOMINEE OF DTC, REFERENCES HEREIN TO THE BONDHOLDERS OR REGISTERED OWNERS OF THE BONDS (OTHER THAN UNDER THE CAPTION “TAX MATTERS”) SHALL MEAN CEDE & CO. AND SHALL NOT MEAN THE BENEFICIAL OWNERS OF THE BONDS.

Discontinuation of Book-Entry Only System

If the City, in its sole discretion, determines that DTC is not capable of discharging its duties, or if DTC discontinues providing its services with respect to the Bonds at any time, the City will attempt to locate another qualified securities depository. If the City fails to find such securities depository, or if the City determines, in its sole discretion, that it is in the best interest of the City or that the interest of the Beneficial Owners might be adversely affected if the book-entry only system of transfer is continued (the City undertakes no obligation to make an investigation to determine the occurrence of any events that would permit it to make such determination), the City shall notify DTC of the termination of the book-entry only system.

SECURITY FOR THE BONDS

General Obligation Pledge

The Bonds constitute general obligations of the City and the full faith and credit of the City are pledged to the payment of the principal of and the interest thereon. The Bonds will be valid and binding general obligations of the City and, unless paid from other sources, the City is authorized and required by law to levy ad valorem taxes if necessary on all

7 real property taxable within the City for the payment of the principal of and interest on the Bonds without limitation as to rate or amount. The City is required to include the total amount of interest and principal due on all of its general obligation indebtedness for the then-current year in each annual municipal budget unless provision has been made for payment from other sources.

Municipal Qualified Bond Act

In addition to being secured by the pledge of the City’s full faith and credit, the Bonds are entitled to the benefits of the Municipal Qualified Bond Act, Title 40A of the New Jersey Statutes, Section 40A:3-1, et seq., as amended (the “Municipal Qualified Bond Act”, such bonds herein being called “Qualified Bonds”). Pursuant to the Municipal Qualified Bond Act, a portion of certain State aid (the “Municipal Qualified Revenues”) allocated to the City in amounts sufficient to pay debt service on Qualified Bonds, is to be withheld by the State Treasurer and forwarded to the Paying Agent for such Qualified Bonds on or before the principal and interest payment dates for such Qualified Bonds for deposit into accounts established for the purpose of paying debt service on such Qualified Bonds. Those funds are further deposited into accounts established for the purpose of paying debt service on such bonds. See “APPENDIX A – CITY INDEBTEDNESS AND DEBT LIMITS – Municipal Qualified Bond Act” herein.

With respect to the Qualified Bonds, the Municipal Qualified Bond Act does not contain a pledge or guarantee that any amounts payable to the Paying Agent will, in fact, be made or continued. Each such annual amount is subject to appropriation by the State Legislature. Moreover, the State is not required to continue to make appropriations of such amounts, nor is the State limited or prohibited from repealing or amending any law heretofore or hereafter enacted for the payment or apportionment of such amounts or in the manner, time or amount thereof. Further, the amount payable to the Paying Agent does not constitute an additional source of revenue available to the City.

For the fiscal year ending December 31, 2015, the City’s total debt service on bonds entitled to the benefits of the Municipal Qualified Bond Act was $28,732,557. State aid is distributed by the State to the City on a “phased aid” schedule. For the fiscal year ending December 31, 2015, the City received payments from the State in August, September, October and November of 2015. The City received a total of $101,290,117 in municipal qualified revenues appropriated by the State to the City in fiscal year ending December 31, 2015.

MUNICIPAL QUALIFIED REVENUES/DEBT SERVICE COVERAGE RATIOS

2015* 2014 2013 2012 2011 Qualified Revenues $101,290,117 $101,290,117 $101,290,117 $90,147,482 $90,136,212 Qualified Bond Debt Service 28,732,557 29,790,218 27,545,244 22,892,151 22,063,225 Coverage Ratio 3.53 3.40 3.68 3.94 4.09

*Unaudited

The City has outstanding bonds, notes and loans for municipal purposes which are not entitled to the benefits of the Municipal Qualified Bond Act. The City may also be responsible for the payment of debt service on the bonds issued by certain independent authorities. See “APPENDIX A – CITY GOVERNMENT STRUCTURE” AND “- CITY FINANCIAL SCHEDULES” herein.

RISK FACTORS

AN INVESTMENT IN THE BONDS INVOLVES A SIGNIFICANT DEGREE OF RISK. POTENTIAL BONDHOLDERS ARE ADVISED TO READ THE ENTIRE PRELIMINARY OFFICIAL STATEMENT, INCLUDING THE APPENDICES HERETO. SPECIAL REFERENCE IS MADE TO THE SECTIONS “CITY FINANCIAL CONDITION AND STATE SUPERVISION”, “RISK FACTORS”, AND “CITY FINANCIAL SCHEDULES 2011 BUDGET – 2015 BUDGET AND PROPOSED FISCAL INITIATIVES OF THE CITY” IN APPENDIX A HEREIN

FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE BONDS.

The following description summarizes some of the risk factors associated with the Bonds and does not purport to be complete. This Official Statement should be read in its entirety. The downturn in the national economy and state economies, as well as the impact of Hurricane Sandy, and the resulting State fiscal emergency created substantial fiscal challenges for both the City and the State (which historically has been a significant source of City operating revenues). Actual and projected reductions in State aid, combined with structural issues, will require the implementation of various additional actions by the City in order to achieve a balanced cash basis budget for the 2016 fiscal year and beyond. In addition, the placement of the City under State fiscal supervision, and the existence of such conditions as has been determined to warrant such State supervision, may influence the ability of the City to address certain structural aspects of its fiscal condition.

The City adopted its annual budget for 2012 on October 16, 2012. Such budget anticipated the receipt of approximately $10 million in financial assistance from the State under its Transitional Aid program, which the City received in December, 2012. Such assistance was provided in the form of a grant, but with the condition that the City be required to appropriate as a repayment to the State in the City’s 2013 budget all funds above $10 million that are available to be used as a revenue in support of the 2013 budget according to the City’s 2012 annual financial statement. Although the City’s audited financial statements reflect a year-end fund balance of approximately $11.4 million, no such repayment was required by the State. The City entered into the 2012 Memorandum of Understanding (the “2012 MOU”) with the State to reflect the requirements binding upon the City in connection with the 2012 State award of Transitional Aid. See “CITY FINANCIAL SCHEDULES – 2012 Budget” in APPENDIX A herein.

The City adopted its annual budget for 2013 on September 10, 2013. Such budget did not include participation in the Transitional Aid program. Accordingly, the 2012 MOU was terminated by its terms on December 31, 2013.

The City applied for Transitional Aid in 2014, and the City’s annual budget for 2014, as adopted by the Local Finance Board on October 14, 2014, anticipated the receipt of $10 million in financial assistance under the Transitional Aid program. The City entered into a 2014 Memorandum of Understanding (the “2014 MOU”) with the State to reflect the requirements binding upon the City in connection with the 2014 State award of Transitional Aid. The 2014 MOU remained in effect through December 31, 2015. See “CITY FINANCIAL CONDITION AND STATE SUPERVISION - 2014 City Budget and State Supervision of City Finances” “CITY FINANCIAL SCHEDULES – 2014 Budget and Proposed Fiscal Initiatives of the City” in APPENDIX A herein.

Although the City successfully adopted a balanced budget for 2015, it did so only as a result of the exercise of certain extraordinary powers that were available because the City was placed under State fiscal supervision, and the award of Transitional Aid to the City. Although continuing access to the State’s Transitional Aid program is not assured, it is likely that the City will remain subject to State fiscal oversight – both under the Supervision Act and the 2015 MOU (and any successor memoranda of understanding) – for the foreseeable future.

The City’s ability to adopt a balanced FY2016 budget will be dependent on a number of factors, including, among other things, the willingness of the Local Finance Board to continue to approve certain deferrals of required appropriations, the maintenance of State aid (including Transitional Aid) at current levels, the ability of the City to carry out planned revenue enhancement and cost containment strategies, and the ability of the City to execute one or more significant 2016 revenue generation strategies. Additional actions may also be required in subsequent fiscal years.

While the City administration and the Division are working to address these and other financial matters, no representation is made regarding whether such actions will be successfully undertaken, or whether any required State or third-party approvals will be obtained.

In addition, the financial condition of the City as well as the market for the Bonds could be affected by a variety of factors, some of which are beyond the City’s control. There can be no assurance that adverse events in the State and in

9 other jurisdictions of the country, including, for example, the seeking by a municipality or large taxable property owner in the City of remedies pursuant to the federal Bankruptcy Code or otherwise, will not occur which might affect the market price of and the market for the Bonds. If a significant default or other financial crisis should occur in the affairs of the State or any of its agencies or political subdivisions or in other jurisdictions of the country which further impacts the acceptability of obligations issued by borrowers within the State, both the ability of the City to arrange for additional borrowings, and the market for and market value of outstanding debt obligations, including the Bonds, could be adversely affected. The City is dependent in part on financial assistance from the State. However, if the State should experience difficulty in borrowing funds in anticipation of the receipt of State taxes in order to pay State aid to municipalities and school districts in the State, including the City, in any year, the City may be affected by a delay, until sufficient taxes have been received by the State to make State aid payments to the City. In several recent years, payments of State aid to the City have been delayed which resulted from the State’s delay in adopting its budget and appropriating State aid to municipalities and school districts, and consequent delay in State borrowing to finance such appropriations. See “STATE AID PROGRAMS - State Aid” in APPENDIX A herein.

NO DEFAULT

There is no report of any default in the payment of the principal of, and redemption premium, if any, and interest on the bonds, notes or other obligations of the City as of the date hereof.

LITIGATION

To the knowledge of the Corporation Counsel, after due injury, there is no litigation of any nature now pending or threatened, restraining or enjoining the issuance and delivery of the Bonds, or the levy or the collection of any taxes to pay the principal of or the interest on the Bonds, or in any manner questioning the validity of the Bonds or the levy or the collection of taxes, or contesting the corporate existing or the boundaries of the City or the title of any of the present officers to the their respective offices; and that, to his knowledge, there is no litigation, pending or threatened that would, if adversely decided, materially affect the financial stability of the City; and that no authority or proceedings for the issuance of the Bonds has or have been repealed, revoked, or rescinded and that all actions or proceedings in regard to the issuance of the Bonds. Upon delivery of the Bonds, the City shall furnish an opinion of its Corporation Counsel, dated the date of delivery of the Bonds, attesting to the status of litigation in the City.

The City and, in some instances, its officers and/or employees, in their official capacity, are defendants in certain lawsuits which may be categorized as follows:

Negligence Actions: There are presently lawsuits alleging tortious conduct and claiming damages against the City and defended by the Office of the Corporation Counsel or contracted outside counsel. In all cases, the City is self- insured and there are appropriate reserves sufficient to cover losses based on experience. To the knowledge of the Corporation Counsel, there is no threat of exposure outside of the self-insurance program.

Contract Actions: There are presently no lawsuits based upon breach of contractual obligations against the City that potentially would have a material adverse impact on the City, if decided adversely. In all cases, the City is self- insured and there are appropriate reserves sufficient to cover losses based on experience. To the knowledge of the Corporation Counsel, there is no threat of exposure outside of the self-insurance program.

Prerogative Writ Actions: There are presently several prerogative writ cases challenging municipal actions against the City and defended by the Office of Corporation Counsel or contracted outside counsel. At this time, it does not appear that any of these actions will have a materially adverse impact on the City.

Land Use Actions: The City is not a defendant in any suit concerning requirements for installation or the financing or operation of sewer or water utilities or other improvements with respect to any land use questions whereby the outcome would have a materially adverse effect upon the financial status of the City.

Tax Appeals: There are Property Tax Appeals pending in the Tax Court of New Jersey against the City involving commercial, industrial and residential properties. It is impracticable for the City to describe in detail each of the appeals that are currently pending against the City. The City vigorously defends each of these appeals through extensive discovery, settlement negotiations and, if necessary, trial. At this time it is impossible to specifically quantify the extent of any potential exposure to the City relating to these appeals. To the knowledge of the Corporation Counsel, the outcome of the Property Tax Appeals will not have a materially adverse impact upon the financial status of the City.

Condemnations: The City is presently the defendant in a few condemnation actions initiated by the State of New Jersey for highway projects. In all of the cases, the City has no overriding public need for the property.

Labor and Employment Matters: There are various labor and employment matters against the City and defended by the Office of Corporation Counsel or contracted outside counsel. In all cases, the City is self-insured and there are appropriate reserves sufficient to cover losses based on experience. To the knowledge of Corporation Counsel, there is no threat of exposure outside of the self-insurance program.

See, also, “CITY FINANCIAL SCHEDULES –Sewer Utility Balances, Revenues and Expenditures” in APPENDIX A herein for a description of potential City exposure for penalties under an Administrative Consent Order relative to the City’s combined sewer outfall system.

TAX MATTERS

The City has covenanted to comply with any continuing requirements that may be necessary to preserve the exclusion from gross income for purposes of federal income taxation of interest on the Bonds under the Internal Revenue Code of 1986, as amended (“Code”). Failure to comply with certain requirements of the Code could cause interest on the Bonds to be includable in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds. In the opinion of DeCotiis, FitzPatrick & Cole, LLP, Bond Counsel, to be delivered at the time of original issuance of the Bonds, assuming continuing compliance by the City with certain covenants described herein, under current law, interest on the Bonds is not includable in gross income for federal income tax purposes and is not an item of tax preference under Section 57 of the Code for purposes of computing the federal alternative minimum tax; however, interest on the Bonds held by corporate taxpayers is included in the relevant income computation for calculation of the federal alternative minimum tax as a result of the inclusion of interest on the Bonds in "adjusted current earnings" (see discussion below). No opinion is expressed regarding other federal tax consequences or other federal taxes arising with respect to the Bonds.

The Code imposes certain significant ongoing requirements that must be met after the issuance and delivery of the Bonds in order to assure that the interest on the Bonds will be and remain excludable from gross income for federal income tax purposes. These requirements include, but are not limited to, requirements relating to use and expenditure of proceeds, yield and other restrictions on investments of gross proceeds, and the arbitrage rebate requirement that certain excess earnings on investments of gross proceeds of the Bonds be rebated to the federal government. Noncompliance with such requirements may cause interest on the Bonds to become subject to federal income taxation retroactive to their date of issuance, regardless of the date on which such noncompliance occurs or is discovered. The City has covenanted that it shall do and perform all acts permitted by law that are necessary or desirable to assure that interest on the Bonds will be and will remain excluded from gross income for federal income tax purposes. The City will deliver its Arbitrage and Tax Certificate concurrently with the issuance of the Bonds, which will contain provisions relating to compliance with the requirements of the Code, including certain covenants in that regard by the City. In rendering its opinion, Bond Counsel has relied on certain representations, certifications of fact, and statements of reasonable expectations made by the City in connection with the Bonds, and Bond Counsel has assumed compliance by the City with certain ongoing covenants to comply with applicable requirements of the Code to assure the exclusion of interest on the Bonds from gross income under Section 103 of the Code.

In the opinion of Bond Counsel, under current law interest on the Bonds and any gain on the sale thereof are not includable as gross income under the New Jersey Gross Income Tax Act.

The opinions of Bond Counsel are limited to and based upon the laws and judicial decisions of the State and the federal laws and judicial decisions of the United States of America as of the date of the opinions, and are subject to any

11 amendment, repeal or other modification of the applicable laws or judicial decisions that served as the basis for their opinions or to any laws or judicial decisions hereafter enacted or rendered. Bond Counsel assumes no obligation to update its opinions after the issue date to reflect any future action, fact or circumstance, or change in law or interpretation, or otherwise. Bond Counsel expresses no opinion on the effect of any action taken after the date of the opinions or not taken in reliance upon an opinion of other counsel on the exclusion from gross income for federal income tax purposes of interest on the Bonds.

Alternative Minimum Tax. Section 55 of the Code provides that an alternative minimum tax is imposed on corporations at a rate of 20 percent. For purposes of the corporate alternative minimum tax, the Code includes an increase adjustment for computation of the alternative minimum tax consisting generally of seventy-five percent of the amount by which "adjusted current earnings" exceeds alternative minimum taxable income (computed without regard to this adjustment and the alternative tax net operating loss deduction). Thus, to the extent that interest on the Bonds is a component of a corporate holder's "adjusted current earnings", a portion of that interest may be subject to an alternative minimum tax.

Bank Qualification. The Bonds will not be designated as qualified under Section 265 of the Code by the City for an exemption from the denial of deduction for interest paid by financial institutions to purchase or to carry tax-exempt obligations.

Branch Profits Tax. Section 884 of the Code imposes on foreign corporations a branch profits tax equal to 30 percent of the "dividend equivalent amount" for the taxable year, unless modified, reduced or eliminated by income tax treaty in certain instances. Interest on the Bonds received or accrued by a foreign corporation subject to the branch profits tax may be included in computing the "dividend equivalent amount" of such corporation for purposes of the branch profits tax.

S Corporation Tax. Section 1375 of the Code imposes a tax on the "excess net passive income" of certain S corporations with passive investment income in excess of 25 percent of gross receipts for a taxable year. The U.S. Department of Treasury has issued regulations indicating that interest on tax-exempt Bonds, such as the Bonds, held by an S corporation would be included in the calculation of excess net passive income.

Other Federal Tax Consequences. Owners of the Bonds should be aware that the ownership of tax-exempt obligations may result in other collateral federal income tax consequences to certain taxpayers, including property and casualty insurance companies, individual recipients of Social Security and Railroad Retirement benefits, and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or to carry tax-exempt obligations. Owners of each of the Bonds should consult their own tax advisors as to the applicability and the effect on their federal income taxes of the alternative minimum tax, the branch profits tax and the tax on S corporations, as well as the applicability and the effect of any other federal income tax consequences.

Possible Government Action. Legislation affecting municipal Bonds is regularly under consideration by the United States Congress. In addition, the Internal Revenue Service (“IRS”) has established an expanded audit program for tax-exempt Bonds. There can be no assurance that legislation enacted or proposed or an audit initiated or concluded by the IRS after the issue date of the Bonds involving either the Bonds or other tax-exempt Bonds will not have an adverse effect on the tax-exempt status or market price of the Bonds.

ALL POTENTIAL PURCHASERS OF THE BONDS SHOULD CONSULT WITH THEIR TAX ADVISORS IN ORDER TO UNDERSTAND THE IMPLICATIONS OF THE CODE.

See APPENDIX C for the form of Bond Counsel legal opinion to be delivered concurrently with the issuance of the Bonds.

OFFICIAL STATEMENT

The City hereby states that it has prepared and reviewed this Official Statement and that the descriptions, statements and financial and statistical information contained herein, including that set forth in Appendix A and Appendix

B, are true and correct in all material respects and it will confirm same to the Underwriter (as hereinafter defined) of the Bonds, by certificates signed by certain City officials and officers. See “CERTIFICATES OF THE CITY” herein.

Bond Counsel has participated in the review of this Official Statement, but has not participated in the collection of the financial, demographic and statistical information contained in Appendix A and Appendix B and throughout this Official Statement, nor has it verified the accuracy, completeness, or fairness thereof, and, accordingly, expresses no opinion or other assurance with respect thereto.

Corporation Counsel has not participated in the preparation of the information contained in this Official Statement, nor has he verified the accuracy, completeness, or fairness thereof, and, accordingly, expresses no opinion or other assurance with respect thereto, but has reviewed the sections under the caption entitled “LITIGATION” herein and expresses no opinion or other assurance with respect thereto other than that which is specifically set forth herein with respect thereto.

Samuel Klein and Company, the Auditor to the City, has not participated in the preparation of the information contained in this Official Statement, except as hereinafter noted, nor has it verified the accuracy, completeness, or fairness thereof, and, accordingly, expresses no opinion or other assurance with respect thereto, but has prepared Appendix B to this Official Statement.

All other information has been obtained from sources which the City considers to be reliable and it makes no warranty, guaranty or other representation with respect to the accuracy and completeness of such information.

LEGALITY FOR INVESTMENT

The State and all public officers, municipalities, counties, political subdivisions and public bodies, and agencies thereof, all banks, bankers, trust companies, savings and loan associations, savings banks and institutional, building and loan associations, investment companies, and other persons carrying on banking business, all insurance companies, and all executors, administrators, guardians, trustees, and other fiduciaries may legally invest any sinking funds, moneys or other funds belonging to them or within their control in any debt obligations of the City, including the Bonds, and such debt obligations are authorized security for any and all public deposits.

MUNICIPAL BANKRUPTCY

The Federal Bankruptcy Act (Chapter IX of the Bankruptcy Code, 11 U.S.C. 901 et seq.) (the “Federal Bankruptcy Act”) permits a municipality or agency that is unable to meet its debt to file a petition for bankruptcy for the purpose of filing a plan to adjust its debts. The petition stays the judicial or other proceedings against the public body. The plan must be approved by creditors holding at least two-thirds of the amount of debts, and more than one-half of the creditors of the bankrupt municipality or agency.

The Federal Bankruptcy Act was amended by Public Law 100-597, approved November 3, 1988, which provides that special revenues (defined to include the receipts from projects used to provide utility services, including the proceeds of borrowings to finance the projects) shall continue to be available to pay debt service and necessary operating expenses, and are not subject to claims by other creditors of the bankrupt. Also, it provides that any payments to a bondholder are unaffected by the bankruptcy.

The State of New Jersey has authorized political subdivisions thereof to file such petitions for relief under the Code pursuant to and subject to Article 8 of the New Jersey Municipal Finance Commission Act (the “Act”). That Act provides such petitions may not be filed without the prior approval of the Municipal Finance Commission and that no plan of adjustment of the debt of a municipality may be filed or accepted by the petitioner without express authority from the Municipal Finance Commission to do so. It is unclear whether or not the provision of the Act requiring that the plan of adjustment be approved by the Municipal Finance Commission is enforceable.

Reference should also be made to N.J.S.A. 52:27-40 et seq., which provides that a municipality has the power to file a petition in bankruptcy provided the approval of the Municipal Finance Commission has been obtained. The powers of the Municipal Finance Commission have been vested in the Local Finance Board. The Federal Bankruptcy Act specifically provides that Chapter IX does not limit or impair the power of a state to control, by legislation or otherwise, the procedures that a municipality must follow in order to take advantage of the provisions of the Federal Bankruptcy Act.

The above references to the Federal Bankruptcy Code are not to be construed as an indication that the City expects to resort to the provisions of the Federal Bankruptcy Code or that, if it did, such action would be approved by the Municipal Finance Commission, or how any proposed plan would affect the source of payment of and security for the Bonds.

BONDHOLDERS’ RISK

It is understood that the rights of the holders of the Bonds, and the enforceability thereof, may be subject to bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’ rights heretofore or hereafter enacted to the extent constitutionally applicable and that their enforcement may also be subject to the exercise of judicial discretion in appropriate cases.

APPROVAL OF LEGALITY

All legal matters incident to the authorization, the issuance, the sale and the delivery of the Bonds are subject to the approval of Bond Counsel, whose approving legal opinion with respect to the Bonds will be delivered with the Bonds substantially in the form set forth as Appendix D hereto. Certain legal matters with respect to the Bonds will be passed on for the City by Corporation Counsel, Willie Parker, Esq. The various legal opinions to be delivered concurrently with the delivery of the Bonds express the professional judgment of the attorneys rendering the opinions as to the legal issues explicitly addressed herein. In rendering a legal opinion, the attorney does not become an insurer or guarantor of that expression of professional judgment, of the transaction opined upon, or the future performance of parties to the transaction, nor does the rendering of an opinion guarantee the outcome of any legal dispute that may arise out of the transaction.

CERTFICIATES OF THE CITY

Upon the delivery of the Bonds, the City will deliver certificates to the Underwriter (as hereinafter defined), in form satisfactory to Bond Counsel and signed by officials of the City, stating to the best knowledge of said officials, that this Official Statement as of its date did not contain any untrue statement of a material fact, or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and stating, to the best knowledge of said officials, that there has been no material adverse change in the condition, financial or otherwise, of the City from that set forth in or contemplated by this Official Statement. In addition, the City will also deliver certificates to the Underwriter, in form satisfactory to Bond Counsel, evidencing the proper execution and delivery of the Bonds and receipt of payment therefor, and certificates dated as of the date of the delivery of the Bonds, and signed by the officers who signed the Bonds, stating that no litigation is then pending or, to the knowledge of such officers, threatened to restrain or enjoin the issuance or delivery of the Bonds, as applicable, or the levy or collection of taxes to pay the Bonds or the interest thereon, as applicable, or questioning the validity of the statutes or the proceedings under which the Bonds are issued, as applicable, and that neither the corporate existence or boundaries of the City, nor the title of any of the said officers to the respective offices, is being contested.

CONTINUING DISCLOSURE

The City has agreed to comply with the terms of the Securities and Exchange Commission (the “SEC”) Rule 15c2-12, as amended (the “Rule”), as it relates to the Bonds. The City will agree in a Continuing Disclosure Certificate, substantially in the form set forth in APPENDIX D hereto, to provide certain annual financial information to the Municipal Securities Rulemaking Board (the “MSRB”), and to provide, in a timely manner, to the MSRB, notice of the occurrence of certain events with respect to the Bonds. The specific nature of the annual financial information and the

14 information to be contained in the notice of material events is specified in “APPENDIX D — FORM OF CONTINUING DISCLOSURE CERTIFICATE.”

The obligations of the City described above will remain in effect only for such period that (i) the Bonds are outstanding in accordance with their terms and (ii) the City remains an obligated person with respect to the Bonds within the meaning of the Rule. The City reserves the right to terminate its obligation to provide the annual financial information and the notices of material events, as set forth above, if and when the City no longer remains an obligated person with respect to the Bonds within the meaning of the Rule. The City acknowledges that its undertaking pursuant to the Rule described under this heading is intended to be for the benefit of the holders of the Bonds (including holders of beneficial interests in the Bonds).

The City has previously entered into a number of continuing disclosure undertakings in respect of various bond and note issues for the filing of annual financial information and operating data. Such undertakings were entered into with respect to City obligations as well as obligations of the Essex County Improvement Authority, the Housing Authority of the City of Newark and the North Jersey District Water Supply Commission. The City has, on several occasions, completed a late or incomplete filing of annual financial information and operating data with the MSRB and/or the Nationally Recognized Municipal Securities Repositories formerly designated by the SEC in accordance with the Rule (the “NRMSIRs”), and in several instances it appears that the City may not have filed its unaudited statements (in lieu of audited financial statements) by the required times. Additionally, such annual financial information and operating data was not in all cases properly linked to all CUSIPs of the City and those of the other issuers described above. The City has retained Digital Assurance Certification L.L.C. (“DAC”) to assist it in complying with its continuing disclosure undertakings under the Rule.

The Local Fiscal Affairs Law requires that every municipality have an annual audit of its books and accounts to be completed within six (6) months after the close of its fiscal year. The audit has historically been completed approximately 12 months after the close of the fiscal year.

For the fiscal year ended December 31, 2011, the City filed its unaudited financial statements and operating data with the MSRB on June 28, 2012, and its audited financial statements on March 21, 2013.

For the fiscal year ended December 31, 2012, the City filed its unaudited financial statements and operating data with the MSRB on June 28, 2013, and filed its audited financial statements on April 7, 2014.

For the fiscal year ended December 31, 2013, the City filed its unaudited financial statements and operating data with the MSRB on April 17, 2014 and filed its audited financial statements on January 26, 2015.

For the fiscal year ended December 31, 2014, the City filed its unaudited financial statements with the MSRB on April 7, 2015 and filed its audited financial statements on August 12, 2015. The City filed its operating data for the fiscal year ended December 31, 2014 with the MSRB on July 1, 2015.

For the fiscal year ended December 31, 2015, the City filed its unaudited financial statements with the MSRB on March 17, 2016. The City filed its operating data for the fiscal year ended December 31, 2015 with the MSRB on June 15, 2015.

Notwithstanding the foregoing, the City had previously learned that its annual filings of operating data did not include certain of the scheduled data that had been included in the original official statements but had since been omitted from subsequent official statements. Although the City believes such omitted data to be immaterial, the City filed such omitted data with the MSRB on November 19, 2014.

Certain of the City’s bond issues were additionally secured by bond insurance policies or were entitled to the benefit of the Municipal Qualified Bond Act or the School Qualified Bond Act, P.L. 1976, c. 39 (N.J.S.A. 18A:24-85 et seq., as amended (the “School Qualified Bond Act”). During the past several years, each of the major bond insurance companies has been downgraded by the major credit rating services and certain of such companies have been downgraded a number of times. In addition, rating changes affecting the State of New Jersey have impacted the credit rating of bonds

15 secured by the Municipal Qualified Bond Act and the School Qualified Bond Act. While the City has filed material event notices in accordance with such undertakings with respect to certain of such downgrades, it has not promptly filed notices in respect of all such downgrades. However, the City has subsequently filed various material event notices which identify the current credit ratings of such previous City bond issues where such ratings are based upon the ratings of such bond insurance companies.

FINANCIAL STATEMENTS

Summaries of the audited financial statements of the City for the years ended December 31, 2014, 2013, 2012, and 2011 (the “Audited Financial Statements”), along with a summary of the unaudited financial statements for the year ended December 31, 2015, are presented in APPENDIX B to this Official Statement. The Audited Financial Statements have been audited by Samuel Klein and Company, Certified Public Accountants, Newark, New Jersey, an independent auditor (the “Auditor”), as stated in its report appearing in APPENDIX B to this Official Statement. See “APPENDIX B – City of Newark Auditor’s Report and Financial Statements.”

The Independent Auditors Report in Appendix B includes summary financial statements – regulatory basis, and related notes, derived from the audited basic financial statements of the City as of and for the years ended December 31, 2014, 2013, 2012 and 2011. The full audit reports for those years are posted on the MSRB’s Electronic Municipal Market Access (“EMMA”) website under the headings “Continuing Disclosure - Audited Financial Statements or CAFR” at the following url: http://emma.msrb.org/IssueView/IssueDetails.aspx?id=MS170365, and are incorporated herein by reference.

The Auditor issued a qualified opinion with respect to the City’s December 31, 2013, Audited Financial Statements. The Auditor stated that it was unable to obtain sufficient appropriate audit evidence about the carrying amount of the City’s cash balances of the various funds for the year ended December 31, 2013. Consequently, the Auditor was unable to determine whether any adjustments to those amounts were necessary. Please refer to the paragraphs entitled “Basis for Qualified Opinion” and “Qualified Opinion” in the Auditor’s report, posted on EMMA (see “2013 Audited Financial Statements for the year ended December 31, 2013 posted 01/26/2015” under the headings “Continuing Disclosure” – “Audited Financial Statements or CAFR” at the following url: http://emma.msrb.org/IssueView/IssueDetails.aspx?id=MS170365.

FINANCIAL ADVISOR

NW Financial Group, LLC, Hoboken, New Jersey has served as Financial Advisor to the City with respect to the issuance of the Bonds (the “Financial Advisor”). The Financial Advisor is not obligated to undertake, and has not undertaken, either to make an independent verification of, or to assume responsibility for the accuracy, completeness, or fairness of the information contained in this Official Statement and the Appendices hereto. RATINGS

Moody’s Investors Service, Inc. ("Moody’s") has assigned its rating of “A3” to the Bonds based upon the applicability of the Municipal Qualified Bond Act to such Bonds. Moody’s has assigned an underlying rating of “Baa3” to the Bonds. The ratings reflect only the views of Moody’s.

Explanations of the significance of a rating given by Moody’s may be obtained from Moody’s at 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, (212) 553-0300. If circumstances so warrant, in the judgment of the abovementioned rating agency, such agency may raise, lower, suspend or withdraw its rating. If a downward change, suspension or withdrawal occurs, it could have an adverse effect on the resale price of the Bonds.

UNDERWRITING

The Bonds are being purchased from the City by ______(the “Underwriter”) at a price of $______. The purchase price of the Bonds reflects the par amount of Bonds equal to $25,000,000, plus an original issue premium in the amount of $______and a reoffering premium retained by the Underwriter in the amount of $______.

The Underwriter intends to offer the Bonds to the public initially at the offering yields set forth on the inside front cover page of this Official Statement, which may subsequently change without any requirement of prior notice. The Underwriter reserves the right to join with dealers and other underwriters in offering the Bonds to the public. The Underwriter may offer and sell Bonds to certain dealers (including dealers depositing Bonds into investment trusts) at yields higher than the public offering yields set forth on the inside front cover page, and such public offering yields may be changed, from time to time, by the Underwriter without prior notice.

MISCELLANEOUS

This Official Statement is not to be construed as a contract or agreement between the City, the Underwriter and the purchasers or holders of any of the Bonds. Any statements made in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended merely as opinions and not as representations of fact. The information and expressions of opinion contained herein are subject to change without notice and neither the delivery of this Official Statement nor any sale of Bonds made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof.

CITY OF NEWARK

By: Danielle Smith Director of Finance

Dated: August __, 2016

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APPENDIX A CERTAIN GENERAL INFORMATION CONCERNING THE CITY OF NEWARK

[ THIS PAGE INTENTIONALLY LEFT BLANK ] THE CITY OF NEWARK

The City of Newark, New Jersey (the “City” or “Newark”) is a municipal corporation having the largest population in the State of New Jersey (the “State” or “New Jersey”). The City covers a land area of 24.14 square miles in the southeastern section of the County of Essex (the “County”) in the State and is located eight (8) miles west of the City of New York and 80 miles northeast of the City of Philadelphia. Newark’s 2010 census population was 277,140, an increase of 15,520 since the 2000 census.

The City is serviced by the area’s major commercial and commuter transportation systems. It is connected to New York City by PATH railroad tubes and Amtrak’s Northeast Coast Corridor tracks and is served by Newark Liberty International Airport as well as the major container and cargo facilities of Port Newark/Elizabeth. Newark is the transportation capital of the State and is headquarters for New Jersey Transit (“NJT”), the State’s rail and bus transportation operating agency that manages the operations of Newark’s Pennsylvania Station (“Penn Station”).

The City is the insurance, finance, and banking capital of the State. Among its largest employers are the Prudential Insurance Company, New Jersey’s largest public utility, Public Service Electric and Gas Company, Anheuser Busch Brewing Company, Verizon, and Horizon Blue Cross/Blue Shield of New Jersey. In addition, banking institutions with an ongoing presence in Newark include: Wells Fargo Bank, N.A., TD Bank, N.A., Bank of America, JP Morgan Chase Bank, PNC Bank, and City National Bank. Newark continues to be one of the State’s major corporate centers.

The City also serves as the County seat for Essex County, with County, State, and Federal courts and governmental offices attracting large numbers of law firms to the City’s central business district (the “Central Business District”).

Newark is a large, vibrant city at the hub of New Jersey industry, transportation, education and commerce. The City continues to grow and embrace the innovation and forward-thinking leadership needed by the current national and state economic climate.

CITY GOVERNMENT STRUCTURE

Newark is a Mayor-Council form of government organized pursuant to the “Faulkner Act” (N.J.S.A. 40:69A-1 et seq.). Incorporated in 1836, the City adopted its present Mayor-Council form of government in November 1954. Under this system, the Mayor functions as the chief executive officer and a nine-member Municipal Council functions as the legislative body.

The executive power of the City is exercised by the Mayor. The Mayor is elected at the regular municipal election for a term of four (4) years. As the chief executive officer of the City, he supervises the administration of the charter and ordinances of the City. Included among his powers are the right to veto ordinances adopted by the Municipal Council; appointment of the directors of the ten (10) operating departments with the approval of the Municipal Council; supervision, through the Business Administrator, of the operating departments and agencies of the City government; establishment of salaries, wages, and other compensation for all administrative employees; and various other powers of appointment and removal as provided by the charter and general laws. In addition to the duties and powers outlined above, it is the responsibility of the Mayor in conjunction with the Business Administrator to prepare an annual operating budget and to submit it to the Municipal Council for approval.

The legislative power of the City is vested in the Municipal Council, which is comprised of nine (9) council members elected at the regular municipal election for a term of four (4) years. One council member is elected from each of the City’s five (5) wards and four (4) council members are elected at large. The Municipal Council is responsible for the approval of the municipal budget, the establishment of A-1 financial controls, and the setting of salaries for all employees of the Municipal Council and the City Clerk. The Municipal Council is empowered to review and approve the Mayor’s annual budget, reduce or increase municipal appropriations requested by the Mayor, override the Mayor’s veto of any ordinance approved by the Municipal Council, remove any City officer for cause, other than the Mayor or a member of the Municipal Council, and investigate the conduct of any department, office, or agency. Additionally, mayoral appointments of department heads are subject to the advice and consent of the Municipal Council. The City Clerk serves as the clerk of the Municipal Council and maintains the minutes and records of its proceedings in the appropriate form.

The Mayor and Municipal Council members all serve four (4) year non-staggered terms (July 1, 2014-July 1, 2018). The next general election will be held in May 2018. The current Mayor and Members of the Municipal Council are as follows:

Name Title Ras J. Baraka Mayor

Augusto Amador Council Vice-President East Ward Councilperson

Gayle Chaneyfield Jenkins Central Ward Councilperson

Mildred C. Crump Council President, Councilperson-at-Large

Carlos M. Gonzalez Councilperson-at-Large

John Sharpe James South Ward Councilperson

Joseph A. McCallum Jr. West Ward Councilperson

Eddie Osborne Councilperson-at-Large

Anibal Ramos Jr. North Ward Councilperson

Luis A. Quintana Councilperson-at-Large

ADMINISTRATION

The City conducts daily operations under ten (10) Departments: Office of the Business Administrator; Administration; Economic and Housing Development; Engineering; Health and Community Wellness; Neighborhood Services; Finance; Water and Sewer Utility; Police; and Fire. In addition to the listed Departments, the City administers the operations of various Boards and Offices including but not limited to: the Boards of Adjustment, Planning, Alcoholic Beverage Control, Office of Affirmative Action, and Rent Control Board, each of which perform certain special functions.

The following are brief biographical sketches of the City officials with major responsibility for financial management:

Ras J. Baraka was elected Mayor of the City of Newark in May 2014, becoming Newark’s 40th Chief Executive since the City’s incorporation in 1836. Baraka was educated in the Newark Public schools and received a Bachelor of Arts degree in Political Science and History from Howard University in Washington, D.C. and a Master’s Degree in Education Supervision from St. Peter’s University in Jersey City. He was elected to the Newark Municipal Council to represent the South Ward in May 2010. A-2 Mayor Baraka taught elementary school for 10 years and coached girls’ basketball before becoming the principal of Central High School in 2007, serving in that position until 2014. In 1994, Baraka became a Deputy Mayor under former Mayor Sharpe James, serving in that role until November 2005. That same year, he was appointed to complete the Municipal Council vacancy created by the death of Councilmember-at-Large Donald K. Tucker.

Baraka has established various anti-crime initiatives, which include Newark’s Committee on Violence, the opening of a mini-precinct in partnership with the Newark Police Department, securing additional patrols by collaborating with county officials and creating the annual “24 Hours of Peace Cultural Event,” where he joined local and nationally recognized talent to advocate for peace and gun control, aimed at ensuring 24 hours of non-violence. An advocate for gang intervention and prevention, Baraka served as one of the key organizers and mediators of the Newark Cease Fire/Peace Initiative that took place in May 2004. He was also a founding member and served as the chairman for the historic First National Hip-Hop Political Convention, held in Newark in 2004. Baraka has also focused his time in public service on leveling the disparity between low and moderate-income and market-rate housing as well as bringing affordable housing to urban areas.

John Kelly was appointed as Business Administrator on March 4, 2015. Mr. Kelly received a Masters of Public Administration degree in 1984 from Kean College, where he also earned his bachelor’s degree. Mr. Kelly worked for more than eight (8) years as a budget analyst in the County of Essex. Thereafter he joined the City of Orange, where he was the Chief Financial Officer and the Director of Finance. In February 2009, Mr. Kelly became the City Administrator for the City of Orange. Mr. Kelly was appointed as the Director of the Department of Administration for the City of Jersey City on May 12, 2010 and served in such capacity for three (3) years. Most recently Mr. Kelly served as City Manager for the City of Asbury Park. Mr. Kelly is also a Certified Municipal Finance Officer and a Certified Tax Assessor.

Danielle Smith was named as Finance Director and Chief Financial Officer in 2015. Ms. Smith has worked for the City of Newark for 23 years and has served in various positions in the Finance Department. From 2006 to December 2013, she was the Comptroller for the City. Ms. Smith graduated from Morgan State University with a Bachelor of Science degree in Business Administration. She also holds a Masters of Business Administration from Hampton University. In addition, Ms. Smith is a Certified Municipal Finance Officer and completed the Certified Public Management courses for levels 1, 2 and 3.

Administration – Auxiliary

The following are operations of Newark that are not directly operated by the City’s administration, but are fiscally budgeted or processed through the City’s budget.

Municipal Court

The Municipal Court of the City of Newark has three (3) main divisions: the Criminal Division; the Traffic Violations Bureau; and the Administrative Support Unit that includes Finance and Data Processing. There are seven (7) full-time judges sitting in the Municipal Court and approximately 93 other employees.

Free Public Library

The Newark Public Library system, comprising the Main Library, the Business Information Center, and 11 neighborhood branches, serves the citizens of Newark as an information center, a learning resource for those in school and those engaged in independent learning, a research center, and a preschoolers’ door to learning. Through its NEON project (NEwark ONline), it offers all residents access A-3 to the Internet and other on-line resources. Under state and federal grants, it also serves as a statewide reference and research center.

Newark Museum Association

The Newark Museum Association (the “Museum”), located near the intersection of Central Avenue and Washington Street, operates a museum which contains 60,000 square feet of exhibition space and 30,000 square feet of direct arts and sciences educational program space, including classrooms and a 300-seat auditorium. Founded in 1909, the Museum is New Jersey’s preeminent cultural institution. Its distinguished collections are international in scope and include American painting and sculpture, decorative art, classical arts, the arts of Asia, Africa, the Americas and the Pacific, numismatics, and the natural sciences. The Museum also includes a restored Victorian mansion, the Ballantine House (circa 1885), designated a national historic landmark, the Newark Fire Museum, and a restored 18th-century schoolhouse. The Museum has 95 full-time and 100 part-time employees.

Newark Public Schools

The Newark School District (the “School District”), with 75 schools, 7,000 employees and a student population of 37,443, is the largest and one of the oldest school systems in New Jersey. The system employs professional and non-professional personnel, including teacher's aides. The student population is provided with a comprehensive school program including college preparatory programs, vocational training and special education classes housed in regular elementary and secondary schools. The school system currently includes 61 elementary, 1 regional day and 13 high schools.

Since 1995, the school system has been operated by the State pursuant to the New Jersey Public School Education Act of 1975, as amended, N.J.S.A. 18A:7A-1 et seq. The Commissioner of Education has appointed a State Superintendent to manage the School District.

The State-operated school district enabling legislation, N.J.S.A. 18A:7A-34 et seq., makes provision for the City to provide moneys to the State-operated school district for the payment of operating expenditures. Chapter 139 of the Pamphlet Laws of 1991 provided a mechanism similar to the pre- existing one for the authorization and issuance of school promissory notes and school serial bonds by the City secured by the power and authority of the City to levy ad valorem real property taxes. The Capital Project Control Board of the Newark Public Schools (the “Capital Project Control Board”) has the authority to review and recommend the necessity for capital projects proposed by the Superintendent. Following the adoption of a resolution by the Capital Project Control Board, the Municipal Council of the City shall consider a school bond ordinance. The State, by the takeover of the school system in the City, has not affected, modified or impaired the authority or the obligation of the City for the levy and collection of sufficient real property taxes to pay the principal of and interest on outstanding school debt.

The School District commenced litigation against the State seeking to terminate the State- operated status. On July 8, 2013, the New Jersey Superior Court, Appellate Division, rejected the School District’s appeal to terminate the State-operated status. On June 4, 2014, the State Board of Education voted to restore local control over the functional area of Fiscal Management to the School District, to take effect upon the State’s approval of a transition plan. Local control over Operations had previously been restored. On June 26, 2015, Governor Chris Christie and Mayor Ras Baraka announced the appointment of the Newark Educational Success Board charged with developing a timeline and benchmarks for the restoration of local control of the remaining three functional areas – Curriculum and Instruction, Personnel and Governance – to the School District.

Public School Budgeting Process. Under the provisions of the New Jersey Public Education Act of 1975, as amended, the Superintendent of a State-operated school district, after preparation of and hearing on a proposed budget, is required to fix and determine the amount of money necessary to be A-4 appropriated for the school year and is required to certify the amounts to be raised by taxes. The City may appeal to the Commissioner of Education the amount determined necessary. The Commissioner of Education, upon receipt of such appeal and completion of the hearing process, shall determine the amount necessary for the district to provide a thorough and efficient educational program including the implementation of any plan to correct deficiencies. The City may apply to the Director of the Division for a determination that the local share of revenues needed to support the district's budget results in an unreasonable tax burden. Based upon this review, the Director of the Division certifies the amount of revenues which can be raised locally to support the budget of the State-operated district. Any difference between the amount which the Director of the Division certifies and the total amount of local revenues required by the budget approved by the Commissioner of Education is paid by the State in the fiscal year in which the expenditures are made, subject to the availability of appropriations. Since Fiscal Year 2000, the State has not supplemented the City's school tax revenues.

ECONOMIC AND HOUSING DEVELOPMENT

The City is pursuing a comprehensive economic development strategy. The City’s economic development efforts will enable Newark to take full advantage of its strategic assets, including its location and transportation infrastructure: seaport and airport; a diverse and underutilized workforce; a large amount of developable land; a concentration of corporate and business service firms; several major universities; and a wealth of arts and cultural institutions. The Department of Economic and Housing Development centralizes the City’s divisions responsible for a wide array of activities – including housing production, business development and attraction, sustainability, prisoner reentry, city planning, and workforce development – in order to ensure that economic development strategies and activities have a comprehensive, unified approach. The City is also committed to developing a variety of green economic initiatives, including promoting energy efficiency, green energy production, and urban agriculture.

The City continues to concentrate such efforts on the following areas:

 Newark has strengthened its status as a global transportation and logistics center by building on growing trade at Port Newark-Elizabeth Marine Terminal (“Port Newark”), improving its competitiveness in the expanding logistics industry, and creating greater access to port and airport employment opportunities for City residents. The City has made use of environmentally sound development practices at port, airport and rail hubs. In addition, the City is actively engaged in attracting businesses and industry to the area around Port Newark.

 The establishment of the Newark Port Career and Business Development Center, which has served 1,700 clients since its launch in 2008, has placed 450 clients in transportation/logistics/distribution jobs.

 Newark has worked to reposition the downtown area as a mixed-use Central Business/Residential District. A new downtown living initiative is at the core of this ongoing effort to transform the City’s downtown area into a vibrant destination and place to live. The ongoing transformation is already evidenced by the 550+ units of market- rate residential housing currently under development or construction downtown.

 Newark’s 150,000 jobs represent the largest concentration of jobs in New Jersey. In order to more effectively meet the employment and training needs of Newarkers, the City has undertaken a restructuring of NewarkWorks (formerly the Mayor’s Office of Employment and Training). The agency is now positioned to take the lead in local workforce development as the operator of the Newark One Stop System as well as a One

A-5 Stop partner agency delivering Workforce Investment Act, Work First New Jersey, and Workforce Learning Link employment and training services to Newark residents.

 The Brick City Development Corporation (“BCDC”) was formed in 2007. BCDC is a non-profit 501(c)(3) public benefit corporation, which was formed and funded to be the City’s catalyst for economic development, real estate transactions, business attraction, and retention. BCDC initiatives have included the Grow Newark Fund, the agency’s small business loan program, which has deployed over $6 million in loan funding to 13 small businesses in Newark; a bond assistance program that has resulted in over $8 million in successful bond bids; and small business technical assistance sessions that have served over 75 clients. On December 1, 2014, BCDC filed a Certificate of Amendment to its Certificate of Incorporation with the State changing its name to the Newark Community Economic Development Corporation (“NCEDC”).

 To ensure optimal value and interconnectedness of the City’s assets, Newark established a new City planning department, the Department of Planning and Community Development, to coordinate comprehensive, planned development of the City’s neighborhoods and key growth areas such as the port.

Current Economic and Housing Development Projects

Among the developers with projects currently in progress or recently completed are the following:

 RBH Group has received various approvals, including Local Finance Board approval, for a Redevelopment Area Bond (“RAB”) for “Teachers Village at Four Corners,” which will consist of 221 residential units and three (3) charter schools. The project received approval from the City’s Landmarks and Preservation Commission and Central Planning Board. The project broke ground in February of 2012 and is still under construction.

 In 2015, RPM Development Group completed construction of a new 77 unit building fronting along Nevada Street and commenced construction on a new 87 residential unit development above 7,000 square feet of retail space fronting along Broad Street.

 RBH Group is redeveloping the 212 Rome site into a sustainable “Makers Village” with an anchor tenant, Aero Farms, an aeroponic farm that grows leafy greens, herbs and flowers in a controlled environment. It will be the largest aeroponic farm in the world. The redevelopment builds upon the goals and objectives of the community and the City of Newark’s sustainable manufacturing initiatives and will create 14 corporate and 68 permanent manufacturing jobs.

 Dranoff Properties and NJPAC is developing One Theater Square, adjacent to New Jersey Performing Arts Center-area, a $110 million, 22 story high-rise residential development with 244+ units and 20,000 square feet of retail space. The project has been awarded $38 million from the State’s Urban Transit Hub Tax Credit program, $9.5 million from the City’s issuance of Motor Vehicle Rental Tax Revenue Bonds in 2015 and $2.3 million in RAB proceeds from the PSE&G financing described herein on page A-35.

 The owner of the Robert Treat Hotel, Miles Berger, formed East Park Street Hospitality and has commenced construction of a Tryp Hotel at 24 East Park Street in downtown Newark. The City of Newark received various approvals, including Local Finance Board approval for a RAB. The 100-room hotel will include a 64 seat restaurant/lounge and a 370 square foot multi-purpose library. Current hotel occupancy rates in the City are approximately 90%.

A-6

Affordable Housing and Neighborhood Revitalization

Since 2014, the City of Newark has undertaken a strategic approach to improving the neighborhoods outside the Central Business District. The Model Neighborhood Initiative (MNI) has concentrated financial and human resources to areas in the South and West wards. More police has been deployed to “hot spots” in the neighborhoods where 80% of the homicides are committed; the health department has expanded services and a new health clinic is under construction in the South Ward and a new clinic has opened in an existing facility in the West Ward; over 100 vacant lots have been sold to developers and construction has commenced on new homes; murals have improved the landscape and over 200 trees have been planted throughout the neighborhoods. The MNI model has demonstrated tremendous progress in the neighborhoods and is validated by a reduction in crime and increased resident participation.

The City of Newark has added over 1,000 units of affordable and market rate housing projects since 2014, of which 600 units are new construction. The Housing Authority of the City of Newark has built 398 units of housing within the same timeframe.

Land Disposition and Tax Abatement Policies – The City has created new land disposition and tax abatement initiatives that provide incentives for such community benefits as creating job opportunities for Newark residents, committing to minority contracting, incorporating union labor, and using environmentally sound building techniques. The City has put 104 parcels up for sale that will be governed by the new Land Disposition Policy.

West Ward Initiative – Piloting the land disposition policy and drawing upon the City’s new abandoned property ordinance, this initiative will reactivate City-owned vacant and privately owned abandoned properties within a 20-block area in the West Ward. A team of 13 developers, led by organizations like the Newark Housing Partnership, includes 11 minority-owned developers and ten (10) Newark-based firms. The development was guided by partners including the Urban League of Essex County and Habitat for Humanity.

 Over 233 units were rehabilitated by 17 small, local contractors.  The Greater Newark Conservancy’s (the “GNC”) Clean and Green Crew has addressed over 50 lots in the area and planted over 200 trees.  The GNC is building a community garden for use by the 13th Avenue School Community in addition to constructing traffic bump-outs and crosswalks along 12th Avenue.

Working with NCEDC, the City has supported new businesses, expanded cultural opportunities, and installed streetscape and lighting improvements along Clinton Avenue, a corridor with great potential to be the thriving link between the Lincoln Park neighborhood and downtown.

With more than $40 million dollars committed over the past decade, the City is in the midst of the largest open space expansion and rehabilitation in over a century, and has already doubled City parkland.

Economic Development Activity

Teachers Village is a vibrant, mixed use, pedestrian-oriented community on five (5) blocks in the heart of downtown Newark in the Central Business District. Prior to the groundbreaking, 90% of the neighborhood was comprised of surface parking lots. The project consists of six (6) new buildings that contain:

A-7 - Three (3) not-for-profit charter schools (SPARK Academy for grades k through 5; Discovery Charter School for 4th through 8th graders; and Great Oaks for grades 6 through 8) and a daycare facility that together serve more than 1,000 predominantly low income students in over 104,000 square feet. The schools are housed in two (2) buildings that were completed in 2014. - 204 units of rental housing marketed to teachers in 235,000 square feet, about 20% of the units of which will be dedicated to affordable housing. The residential portion is currently “oversubscribed” with teachers who make up its prospective renters. A lottery was recently held for the first 123 apartment units. - 20 different high quality retail businesses in 65,000 square feet will provide jobs and services to the neighborhood. Thirteen leases have been signed and ten (10) of these are currently in design or under construction.

In 2015, Prudential completed construction of an office tower in close proximity to its existing headquarters on Broad Street. The $444 million, 740,000 square foot, 20-story building includes approximately 47,000 square feet of retail development with tenants like Nike and Starbucks. About 3,000 of Prudential’s nearly 48,000 employees across the globe will be located in the new tower.

Over the past few years, the City has experienced a surge of small and large-scale economic development projects initiated by the private sector. This private sector investment is a result of a coordinated effort by the Department of Economic and Housing Development, the Newark Housing Authority, and other municipal planning and development agencies. The Central Business District has been the site for a number of these projects.

Newark has continued to grow in a difficult economic environment. Industrial development and leasing remain strong in Newark, with strong continuing demand for warehouse, transportation, and distribution facilities.

Summary of Projects under Construction: Project Investment

The Hahnes Project $ 175,000,000 Teachers Village 159,000,000 East Park Street Hospitality Urban Renewal (Tryp Hotel) 15,000,000 36-54 Rector Urban Renewal (Market Rate Housing) 64,000,000 Riverside Arms Apartments 24,000,000 Carrino Plaza Apartments 26,000,000 Hari Newark Urban Renewal (Homewood Suites Hotel by Hilton) 14,000,000 999 Broad Street Phase 1 20,400,000 Hampton Valley Apartments 3,000,000 Aero Farms at the 212 Rome site 14,000,000 Cherry Park Apartments 12,000,000 Scattered Sites Housing Projects 10,000,000 Lofts @ Lincoln Park Condominiums 6,000,000

Newark Liberty International Airport and Port Newark

Newark Liberty International Airport (the “Airport”), partially located in the City, is approximately 16 miles west of midtown Manhattan. In 2013, over 35 million passengers travelled through the Airport, along with 662,422 tons of air cargo and 54,677 tons of air mail. A shuttle service provides access to the Airport for passengers of the PATH system and Amtrak commuter trains. NJT buses connect the City’s two train (2) stations and bus terminals with Terminals A, B, and C of the Airport. Over the past decade, the Airport has completed over $1 billion in infrastructure improvements, A-8 including a $400 million Airport Railroad Station at Waverly Yards that connects the on-airport passenger monorail tram system with the Northeast Corridor and NJT passenger train service. The Airport is the first metro region airport offering passenger rail services from the Northeast Corridor directly to air passenger terminals. In addition, NJT completed construction of the first two-mile operable segment of the Newark Elizabeth Rail Link, a light rail transit system linking NJT’s Newark Broad Street Station to Penn Station.

Port Newark is a waterfront terminal development located on Newark Bay adjacent to Newark Liberty International Airport. The marine terminal contains approximately 2,230 acres of maritime property, including wharves, berthing space (about 41,000 lineal feet), container cranes, transit sheds, open storage areas, buildings, roadways, and railroad trackage. The terminal is served by Conrail which offers direct ship-to-rail transfer at the vessel berths. Port Newark handles over 2.5 million containers annually and rising, making it the third busiest port in the United States. Port Newark is currently undergoing a $650 million expansion, which will generate as many as 6,900 jobs a year throughout the region.

The City has leased Newark Liberty International Airport and Port Newark to the Port Authority of New York and New Jersey (the “Port Authority”) since March 22, 1948.

Lease Between City and Port Authority

In 2002, the City reached agreement with the Port Authority on an extension of the Port Authority’s lease of the land on which Newark Liberty International Airport and Port Newark are located. Pursuant to this agreement, the lease was extended through 2065 and established a minimum annual rent of $68 million beginning in 2002, with higher rent should certain gross revenue levels be reached; the minimum annual rent may increase every five (5) years based on Port Authority average gross revenues from the two (2) facilities. From 2007-2011, the City received a minimum of $71.6 million per annum. The City and the Port Authority entered into discussions regarding the additional rent payments that the City will receive. As a result of these discussions, the City will receive a minimum of $84.7 million in annual rent from 2012-2016. The next round of negotiations between the City and Port Authority will be in 2017. There are separate payments by the Port Authority in the amount of $12.5 million per year for 35 years that area pledged, and assigned by the Newark Housing Authority to the Trustee for the bonds, to pay debt service on bonds issued by the Newark Housing Authority (as the City’s assignee), which bonds financed the construction of the Prudential Arena and other related redevelopment projects located in the Newark Downtown Core Redevelopment District. See “Newark Downtown Core District Redevelopment Plan” below.

Additionally, the lease agreement provides that, if the Port Authority enters into a new lease with the City of New York relating to John F. Kennedy International Airport and LaGuardia Airport, or amends the existing lease with respect to those airports, Newark will have the right to amend the provisions of its lease with the Port Authority with respect to the Airport to conform to the terms agreed upon with New York City. Furthermore, if there is a binding award to the New York City pursuant to the ongoing arbitration proceeding with New York City, or any other dispute between New York City and the Port Authority relating to John F. Kennedy International Airport or LaGuardia Airport, or a settlement thereof, Newark has the right to a proportionate award from the Port Authority, except where this would result in a double recovery to Newark or where amounts are awarded to New York City with respect to an issue unrelated to the leases with Newark. Finally, the lease agreement provides that the proportion of total Passenger Facility Charges received by the Port Authority from the three (3) major airports that is attributable to the Airport shall be used for projects at that Airport.

A-9 Other Public Transportation

The City is serviced by the Garden State Parkway, the New Jersey Turnpike and a system of interconnecting highways, which provide access to the major commercial, industrial and residential areas of Newark and the County. The State recently committed monies for improvements and changes in access ramps into the City from Routes 78 and 280.

The City is connected to New York City and cities in New Jersey by PATH, Amtrak and NJ Transit. In addition, NJT rail lines connect the City directly with the Airport linking the two (2) major transportation hubs.

NJT provides citywide bus service. NJT and Newark share oversight of bus lanes for the Central Business District. During peak traffic hours in the morning (6:30 a.m. - 9:30 a.m.) and afternoon (4:30 p.m. - 6:30 p.m.) the curb lanes on both sides of Broad and Market Streets are dedicated for buses only. This program has dramatically improved the flow of traffic and has improved the timeliness of bus service. In addition, the City is served by the NJT Light Rail (the “Light Rail”), an aboveground rail system, which was completed in 2001. The Light Rail connects the City’s residents and visitors with many destinations throughout the City, including Newark Penn Station, Newark Broad Street Station and the Downtown Business District.

Cultural Arts, Entertainment and Sports in Newark

Cultural activities continue to be a growing attraction within the City. Newark has seen an increase in programs and events attended by Newarkers, New Jerseyans and those from other states as well.

The New Jersey Performing Arts Center (“NJPAC”) opened in October 1997. The NJPAC is home to the Garden State Ballet, the New Jersey Symphony, and the New Jersey State Opera. In 2010, the New Jersey Symphony welcomed internationally respected Jacques Lacombe as its Music Director. NJPAC also hosted the Dodge Poetry Festival in 2010 and 2012. This event alone brought thousands of poets, scholars and students to Newark. Over $100 million of public and private (donated) funds were invested to create the NJPAC on a 12-acre tract in the Central Business District. The center currently consists of a building which houses a 2,700 seat multi-purpose theater, a 500 seat studio theater, a restaurant, banquet facilities, and a gift shop.

Newark Symphony Hall is a 3,000-seat theater originally built in 1925 and added to the National Register of Historic Places in 1977. In addition, the Cathedral Concert Series is held in Sacred Heart Cathedral, the fifth largest Gothic cathedral in the country.

In addition to NJPAC and Symphony Hall, Newark is home to the Bears & Eagles Riverfront Stadium (previous home to the former Newark Bears minor league baseball team) and the Prudential Center, an 18,000 seat multi-purpose arena that opened in October 2007. The Bears & Eagles Stadium was sold to Lotus Equity Group in March 2016. Lotus Equity Group plans to demolish the stadium and build a mixed-use, high-rise tower in its place. The Prudential Center is home to the New Jersey Devils, a professional indoor hockey team, the New Jersey Ironmen, a professional indoor soccer team, Seton Hall University Men’s Basketball and various collegiate hockey teams.

The Prudential Center hosts over 200 events a year including sporting events; major concerts such as Black Eyed Peas, Carrie Underwood, Andrea Bocelli, Usher, Bruce Springsteen, The Who and The Rolling Stones; and major attractions such as Disney on Ice and professional boxing. Along with major events, the Prudential Center is ushering in a new era in sports and entertainment in Newark and the entire Northern New Jersey area. The success of the Prudential Center brings direct and collateral revenue to

A-10 the City, and the area surrounding the Prudential Center has witnessed an influx of restaurants and other service establishments.

Newark Downtown Core District Redevelopment Plan

On October 6, 2004, the Newark Municipal Council adopted an ordinance authorizing creation of the Newark Downtown Core District Redevelopment Plan & Amendment to the Newark Plaza Urban Renewal Plan (the “Newark Downtown Core District”). Concurrently, the Newark Municipal Council adopted a resolution designating the Newark Housing Authority as the Redevelopment Entity under the New Jersey Housing and Redevelopment Act, to implement the Newark Downtown Core District Redevelopment Plan.

In October 2005, the $310 million Newark Downtown Core Redevelopment District Project was approved by the Newark Municipal Council. The Newark Downtown Core District’s keystone was the construction and opening of the Prudential Center. Plans for the Newark Downtown Core District also included structured parking, retail and entertainment and a headquarters building for the Newark Public Schools, to be constructed by others, for a projected total of 1,800,000 square feet at an estimated combined public and private investment of $588 million. The Courtyard Newark Downtown, a six-story, 140 room hotel with over 4,000 square feet of meeting space, along with arena-area restaurants such as Dinosaur Bar-B-Que and Joe’s Crab Shack add new street life to the Prudential Center area.

Passaic Waterfront Park Mixed-Use Development Project

The U.S. Corps of Engineers is completing plans and designs for a $75 million Passaic Riverfront restoration in the Central Business District. Riverfront Park runs from Bridge Street to Brill Street featuring a pedestrian walkway with active and passive recreational amenities. It includes 6,000 linear feet of new bulkhead, 3,200 linear feet of riverbank restoration and 9,200 linear feet of pedestrian waterfront walkway. Presently, 1,800 linear feet of new bulkhead has been constructed, with the pedestrian walkway still to be constructed between Newark Penn Station and the NJPAC. Newark Riverfront Park will be the City's first true waterfront park, covering 3.5 acres and including a 1/3 mile riverfront walk, a public access floating boat dock, native plantings, and lawns for informal gatherings and performances.

The principal property owners are proposing three (3) mixed-use office-residential-retail developments within the Passaic Riverfront Park Area. Participating property owners include Hartz Mountain Industries, the Matrix and Edison Properties. Combined, these companies are proposing to develop over one million square feet of commercial office space within walking distance of Newark Penn Station, including 600 rental residential units and up to 50,000 square feet of retail along the proposed Passaic Riverfront pedestrian walkway.

As an interim waterfront improvement, the City built a public access floating boat dock with a $139,000 grant from the New Jersey Department of Transportation. This will be the first public dock in Newark in over a century. Future plans for the riverfront site include residential, structured parking, open space and retail along the Passaic Riverfront connecting to the Minish Passaic Riverfront Park pedestrian walkway.

Health Care and Hospitals

Newark’s health care facilities represent a growing source of financial strength, investment, and employment. The following are descriptions of the three (3) major hospitals located in Newark:

A-11 Newark Beth Israel Medical Center Newark Beth Israel Medical Center (“Newark Beth Israel”) is a 673-bed, regional care, teaching hospital in Newark with more than 800 physicians, 3,200 employees and 150 volunteers. Newark Beth Israel has over 300,000 outpatient visits and 25,000 admissions annually and is one of only two (2) hospitals in New Jersey where heart transplants are performed, and the only hospital in New Jersey certified to perform lung transplants. Newark Beth Israel is also home to Children’s Hospital of New Jersey, the State’s premier children’s hospital, which provides state-of-the-art care in nearly 30 subspecialties.

St. Michael’s Medical Center Saint Michael's Medical Center is a 357-bed regional tertiary care, teaching, and research center in the heart of Newark's business and educational district. In January 2008, Cathedral Healthcare System announced its approval of its sale to Catholic Health East of three (3) hospitals located in the City – Saint James Hospital, Columbus Hospital and Saint Michael’s Medical Center. In July 2008, St. Michael’s Medical Center issued bonds to fund Catholic Health East’s acquisition of Saint Michael’s Medical Center, and to fund the termination of acute care services at Saint James Hospital and Columbus Hospital and transfer their acute care services to Saint Michael’s Medical Center, in an effort to consolidate inpatient acute care services in the City. Catholic Health East has subsequently entered into an agreement to sell St. Michael’s Medical Center to Prime Healthcare Services, a for-profit corporation. The proposed sale would include a plan to invest $30 million in equipment upgrades and capital improvements, but has been opposed by various community groups and local public officials. The proposed sale is currently under State regulatory review. St. Michael’s Medical Center filed for bankruptcy protection on August 10, 2015 due to the uncertainty of the State’s ongoing review of the proposed sale.

The University Hospital The University Hospital is the core teaching facility of Rutgers Biomedical and Health Sciences of New Jersey, and is the center of referral for many of the State’s most advanced medical services and specialty care programs. The hospital is staffed by 300 full-time attending physicians who are also faculty members of the New Jersey Medical School. The University Hospital includes 530 beds and 2,999 full-time employees and has more than 19,000 admissions, 1,700 births, and 220,000 outpatient visits annually. Effective July 1, 2013, University Hospital became a separate public entity, independent of the University of Medicine and Dentistry of New Jersey (“UMDNJ”). However, it is expected that all existing clinical affiliations will continue.

Higher Education

The City is the site of the University Hospital, which is the principal teaching hospital for Rutgers Biomedical and Health Sciences. The City is also the site of the New Jersey Institute of Technology (“NJIT”), Rutgers - The State University of New Jersey (“Rutgers-Newark”), Seton Hall University Law School, Essex County College (“ECC”) and Berkeley College. These six (6) colleges and universities are spread out over 320 acres and serve a population of 35,000 students and faculty. Rutgers-Newark includes the State’s largest health care professional education center with more than 2,500 students and has a 530- bed acute care hospital. NJIT offers undergraduate and graduate degrees in engineering, architecture, and computer science. Rutgers-Newark offers undergraduate degrees and graduate degrees in law, nursing, business administration, public administration, chemistry, and economics. In 2009, Rutgers-Newark opened its flagship business school at 1 Washington Park, occupying 11 of 17 floors of this refurbished building, and anchoring its presence as a key partner in Newark – both through the increasing size of its footprint and through a variety of Newark programs, including a small business loan fund administered with the BCDC. Seton Hall University Law School, also located in the City, is the third largest Catholic law school in the United States. ECC offers Associate degrees and one-year certificates. In addition, Berkeley College recently opened a campus in Newark, beginning with more than 150 students.

A-12 Newark has promoted and enhanced its status as a regional knowledge center by making its several higher education institutions the focal point for the expansion of new academic and research activities, new industries, and housing and cultural opportunities that more closely integrate these institutions with Newark’s neighborhoods. The Council on Higher Education in Newark (“CHEN”), composed of ECC, NJIT and Rutgers University-Newark, is developing a 50-acre, $200 million University Heights Science Park to attract science and technology-based businesses to benefit from its proximity to university research, students, faculty, and facilities.

RELATED PUBLIC AUTHORITIES

In addition to the agencies described under “CITY INDEBTEDNESS AND DEBT LIMITS – Overlapping Debt” herein, certain regional and City agencies have cooperated with the City in the provision of services to the residents of the City. A description of these agencies and the relationship of each to the City follow.

Joint Meeting of Essex and Union Counties

The Joint Meeting of Essex and Union Counties (the “Joint Meeting”) was organized in accordance with legislation passed in 1899 and operates a joint system for sewage collection and treatment. The City is one of 15 participating municipalities. As a participant, the City assumes a portion of the capital construction and operating costs of the Joint Meeting. The City has occasionally satisfied capital obligations of the Joint Meeting through the issuance of City bonds, and the City intends to do so from time to time in the future. The City’s share of operating costs of the Joint Meeting is based on a user charge system and is provided for annually in the City’s Current Fund budget.

Second River Joint Meeting

The Second River Joint Meeting (the “SRJM”) was organized in 1928. The SRJM operates a joint sewer for seven (7) municipalities to control overflow of sewage into the Second River. Under contractual agreement, the City’s share of operating expenses for the SRJM is 3.19%. There are no construction projects at present for which the City is proportionately responsible. Each participating municipality authorizes and issues its own debt to finance any construction projects. There is currently no debt for the SRJM that is authorized and unissued.

Newark Parking Authority

The Newark Parking Authority (the “Parking Authority”) was created in 1956. Its seven (7) member board is appointed by the Mayor with the advice and consent of the Municipal Council.

Pursuant to a Resolution of the Municipal Council adopted on August 6, 2008 and an Interlocal Agreement between the City and the Parking Authority dated August 8, 2008 (the “Interlocal Agreement”), the City has transferred to the Parking Authority all existing parking assets owned, controlled or operated by the City to become part of the Parking Authority’s parking system (the “Parking System”). The term of the Interlocal Agreement is 40 years, with an option to the Parking Authority to renew for two (2) additional 10 year terms. During the term of the Interlocal Agreement, the Parking Authority is responsible for all costs of operating, constructing, and maintaining the parking assets of the Parking System. The parking assets transferred include parking meter operation and other conveyances, structures and equipment and other real and personal property and rights therein and appurtenances necessary or useful and convenient to the operation of the Parking System.

Under the Interlocal Agreement, the Parking Authority is entitled to share in the City’s ticket revenues. The Parking Authority is required to pay to the City certain amounts to allow the City to pay debt service on debt issued for certain upgrades to the Parking System. A-13

Under the Interlocal Agreement, the Parking Authority is obligated to operate and maintain, and to the extent the Parking Authority deems feasible, enlarge the Parking System. To allow the Parking Authority to effectively and efficiently operate the Parking System, the Parking Authority’s duties include, among others, bus lane enforcement, the establishment of a billing system, control over on-street parking spaces and meters, and the operation of towing and vehicle storage facilities.

Newark Watershed Conservation and Development Corporation

This agency was responsible for the protection, coordination, review, and planning of limited development of the 35,000 acres in the Pequannock Watershed which the City owns in northwestern New Jersey. This watershed contains five (5) reservoirs from which the City obtains 80 mgd. The storage capacity of the five (5) reservoirs is 14.4 billion gallons. The watershed is 35 miles from the City and is one of the region’s largest open spaces. Limited economic development is being planned on a small portion of the watershed for the purpose of relieving the City of the tax burden of this property resulting from the obligation of the City to pay taxes to various municipalities included in the watershed. Such funds are raised annually in the City’s Water Utility operating budget.

On March 26, 2013, the City was informed that the Newark Watershed Conservation and Development Corporation would be dissolving as of May 31, 2013. As a result, the City reassumed control of its water utility as of such date and has hired certain former employees of the Corporation to assist in such operation. The City appointed Andrea Adebowale as Director of the Water and Sewer Utilities.

Newark Housing Authority

The Housing Authority of the City of Newark (the “Housing Authority”) is operated by a seven- member Board of Commissioners, five (5) of whom are appointed by the Mayor with the concurrence of the Municipal Council, one of whom is appointed by the Governor, and one of whom is appointed by the Mayor without the concurrence of the Municipal Council. Operations of the Housing Authority are centered in two divisions, Public Housing and Urban Renewal. The responsibilities of the Urban Renewal Division include the redevelopment of residential, industrial, and commercial properties, relocation of affected residents, and acquisition and disposal of properties.

The Housing Authority has a total of 325employees and currently operates 7,000 public housing units, plus 4,000 Section 8 units. Certain outstanding bonds of the Housing Authority are described below.

In February 2007, the Housing Authority issued $7,780,000 Port Authority-Port Newark Marine Terminal Additional Rent-Backed Bonds, Series 2007 (City of Newark Redevelopment Projects) and $168,320,000 Port Authority-Port Newark Marine Terminal Additional Rent-Backed Refunding Bonds, Series 2007 (City of Newark Redevelopment Projects), which bonds refinanced the construction of the Prudential Arena and other related redevelopment projects located in the Newark Downtown Core Redevelopment District

In July 2009, the Housing Authority issued $68,000,000 of its City Secured Police Facility Revenue Bonds (South Ward Police Facility), Series 2009A (the “Police Facility Bonds”), the payment of which is secured by semiannual capital grant payments required to be made by the City in an amount sufficient to pay all debt service on the Police Facility Bonds. The Housing Authority’s Series 2016 Bonds were issued on July 6, 2016 to advance refund on December 1, 2019 the Police Facility Bonds maturing on or after December 1, 2020 (the “Series 2016 Bonds”).

A-14 With the exception of the outstanding Police Facility Bonds and the Series 2016 Bonds, none of the Housing Authority’s debt is a liability of the City.

CITY INDEBTEDNESS AND DEBT LIMITS

General

The Local Bond Law, N.J.S.A. 40A:2-1 et seq (the “Local Bond Law”), generally governs the issuance of bonds and notes to finance certain general municipal and utility capital expenditures. Among its provisions are requirements that bonds must mature within the statutory period of usefulness of the projects bonded, that bonds be retired in serial installments, and, with certain exceptions, a 5% cash down payment is required toward the financing of expenditures for municipal purposes. Nearly all bonds and notes issued by the City are general (“full faith and credit”) obligations.

The City may sell short-term “bond anticipation notes” to temporarily finance a capital improvement or project in anticipation of the issue of bonds, if the bond ordinance so provides. Under the Local Bond Law, bond anticipation notes, which are full faith and credit obligations of the issuer, may be issued for a period not exceeding one (1) year and may be renewed from time to time, for a period that does not exceed one (1) year. All bond anticipation notes, including all renewals, must be paid not later than three (3) years from their original date, unless the issuer begins to amortize such notes beginning in the third year. If the appropriate amortization is commenced in the third year, such notes must finally mature and be paid not later than the first day of the fifth month following the close of the tenth fiscal year next following the date of the original notes.

To ensure the continuing tax exemption of its various outstanding bond and note issues, the City is required to periodically determine its liability, if any, relating to arbitrage rebate. The City cannot estimate at this time the amount of any such liability, which could also include liability for interest and penalties.

Tax Anticipation Notes

The City may issue tax anticipation notes in any fiscal year in anticipation of the collection of taxes for such year whether levied or to be levied in such year or in anticipation of certain other revenues for such year, subject to the limits described below. The proceeds of the sale of such notes, unless used to redeem outstanding notes, must be applied to purposes provided for in the City budget or for which taxes are levied or to be levied for such year and may not be applied for any other purpose. Under State law, tax anticipation notes and any renewals thereof shall mature not later than 120 days after the close of the fiscal year.

The City is limited in the amount of tax anticipation notes of any fiscal year that can be outstanding at any time. Such amount shall not exceed an amount certified as the gross borrowing power of the City and no such notes shall be authorized in excess of an amount certified as the net borrowing power of the City. The gross borrowing power of the City with respect to tax anticipation notes for any fiscal year is 30% of the tax levy of the preceding fiscal year for all purposes plus 30% of the amount of the miscellaneous revenues realized in cash during the preceding fiscal year. The net borrowing power of the City for tax anticipation notes is determined by subtracting from the gross borrowing power the amount of tax anticipation notes outstanding for the current fiscal year except such notes as will be renewed by or paid from the proceeds of the bonds to be issued.

The City issued two (2) series of tax anticipation notes totaling $54,905,000 on April 19, 2016 (the “Series 2016A and Series 2016B Notes”). The Series 2016A and Series 2016B Notes mature on February 15, 2017.

A-15 Debt Limits

State statutes set forth debt limits for counties and municipalities. The City’s net debt is limited by the Local Bond Law to an amount equal to 3 1/2% of its equalized valuation basis. The equalized valuation basis of the City is set by statute as the average value of all taxable real property within its boundaries as annually certified in the valuation of all taxable real property in the table of equalized valuation by the Director of Taxation, Department of Treasury, State of New Jersey (the “Division of Taxation”). Certain categories of debt are permitted by statute to be deducted for purposes of computing the statutory debt limit. As of December 31, 2015, the City has statutory net debt in the amount of $296,704,239, which amount equals 2.202% of its three (3) year average of equalized valuation basis as of December 31, 2015.

Exceptions to Debt Limit - Extensions of Credit

The debt limit of the City may be exceeded only with the approval of the Local Finance Board. If all or any part of a proposed debt authorization would exceed its debt limit, the City must apply to the Local Finance Board for an extension of credit. In considering the request, the Local Finance Board concentrates its review on the effect of the proposed authorization on outstanding obligations. If the Local Finance Board determines pursuant to statute and regulation that a proposed debt authorization would materially impair the ability of the City to meet its obligations or to provide essential services, approval would be denied. The City has not exceeded its debt limit.

Municipal Qualified Bond Act

Pursuant to the Municipal Qualified Bond Act, Title 40A of the New Jersey Statutes, N.J.S.A. 40A:3-1, et seq., as amended (the “Municipal Qualified Bond Act”, such bonds being called “Qualified Bonds”), a portion of certain State aid (the “Municipal Qualified Revenues”) allocated to the City in amounts sufficient to pay debt service on Qualified Bonds, is to be withheld by the State Treasurer and forwarded to the paying agent for such bonds on or before the principal and interest payment dates for such Qualified Bonds for deposit into accounts established for the purpose of paying debt service on such Qualified Bonds.

The Municipal Qualified Bond Act provides that the Municipal Qualified Revenues so withheld and paid or to be paid to and held by the paying agent are deemed to be held in trust and exempt from being levied upon, taken, sequestered, or applied toward paying the debts of the City other than the payment of debt service on any such Qualified Bonds of the City issued for municipal purposes or water utility purposes and entitled to the benefits of the Municipal Qualified Bond Act.

The Municipal Qualified Bond Act does not relieve the City of its obligation to include in its annual budget amounts necessary to pay, in each year, the principal of and interest on any such Qualified Bonds. Such budgeted amounts must be used to pay debt service on such Qualified Bonds of the City in any year in which sufficient Municipal Qualified Revenues are not appropriated. The State has covenanted in the Municipal Qualified Bond Act with the holders of Qualified Bonds that it will not repeal, revoke, rescind, modify, or amend the provisions of such act providing for the withholding of Municipal Qualified Revenues and payment of such revenues to the paying agent for such Qualified Bonds so as to create any lien or charge on or pledge, assignment, diversion, withholding payment or other use of or deduction from such revenues which is prior in time or superior in right to the payment of debt service on such Qualified Bonds.

A-16 Municipal Qualified Revenues/Debt Service Coverage Ratios

2015* 2014 2013 2012 2011 Qualified $101,290,117 $101,290,117 $101,290,117 $90,147,482 $90,136,212 Revenues Qualified Bond Debt 28,732,557 29,790,218 27,545,244 22,892,151 22,063,225 Service Coverage 3.53 3.40 3.68 3.94 4.09 Ratio

*Unaudited

The Municipal Qualified Bond Act does not contain a pledge or guarantee that any amounts payable to the paying agent for such Qualified Bonds will, in fact, be made or continued. Each such annual amount is subject to appropriation by the State Legislature. Moreover, the State is not required to continue to make appropriations of such amounts, nor is the State limited or prohibited from repealing or amending any law heretofore or hereafter enacted for the payment or apportionment of such amounts or in the manner, time or amount thereof. Further, the amount payable to the paying agent for such Qualified Bonds does not constitute an additional source of revenue available to the City.

School Qualified Bond Act

In addition to being secured by the pledge of the City's full faith and credit, certain bonds of the City are entitled to the benefits of the School Qualified Bond Act, Title 18A of the New Jersey Statutes, N.J.S.A. 18A:24-85 et seq., as amended (the “School Qualified Bond Act”). Pursuant to the School Qualified Bond Act, a portion of the amount of State school aid payable to the School District, in amounts sufficient to pay debt service on such bonds, is to be withheld by the State Treasurer and forwarded directly to the paying agent on or before the principal and interest payment dates for such bonds. Those funds are further deposited into accounts established for the purpose of paying debt service on such bonds.

Pursuant to the provisions of the School Qualified Bond Act, the City shall certify to the State Treasurer the name and address of the paying agent, maturity schedule, interest rate or rates and dates of payment of debt service on such bonds within 10 days after the issuance thereof. After receipt of such certificate, the State Treasurer is required to withhold with respect to such bonds from the amount of State school aid payable to the School District an amount which will be sufficient to pay debt service on such bonds as it becomes due. For purposes of the School Qualified Bond Act, “State school aid” means funds made available to local school districts pursuant to the Quality Education Act of 1990, N.J.S.A. 18A:7D-4.

The School Qualified Bond Act provides that the State school aid so withheld and paid or to be paid to and held by the paying agent for such bonds are deemed to be held in trust and exempt from being levied upon, taken, sequestered or applied toward paying the debts of the City other than the payment of debt service on such bonds and other bonds of the City issued for school purposes and entitled to the benefits of the School Qualified Bond Act.

The School Qualified Bond Act does not relieve the City of its obligation to include in its annual budget amounts necessary to pay, in each year, the principal of and interest becoming due on such bonds. However, such budgeted amounts will be forwarded by the City to the School District, to the extent that appropriated amounts have been withheld from the State school aid payable to the School District and have been forwarded to the paying agent for such bonds. Such budgeted amounts must be used to pay debt service becoming due on such bonds and other bonds of the City issued for school purposes and A-17 entitled to the benefits of the School Qualified Bond Act in any year in which sufficient State school aid is not appropriated.

The State has covenanted in the School Qualified Bond Act with the holders of bonds entitled to the benefits of such act, that it will not repeal, revoke, rescind, modify or amend the provisions of such act providing for the withholding of State school aid and payment of such monies to the paying agent for such bonds so as to create any lien or charge on or pledge, assignment, diversion, withholding payment or other use of or deduction from such monies which is prior in time or superior in right to the payment of debt service on such bonds.

School Qualified Revenues/Debt Service Coverage Ratios

2015* 2014 2013 2012 2011 Qualified School Revenues $635,243,822 $714,315,679 $714,315,679 $714,990,694 $672,565,847 Qualified School Debt 10,654,818 10,764,000 11,501,618 14,179,455 14,890,601 Service Coverage Ratio 59.62 66.36 62.11 50.42 45.17

*Unaudited

The School Qualified Bond Act does not contain a pledge or guarantee that any amounts payable to the paying agent for such bonds will, in fact, be made or continued. Each such annual amount is subject to appropriation by the State Legislature. Moreover, the State is not required to continue to make appropriations of such amounts, nor is the State limited or prohibited from repealing or amending any law heretofore or hereafter enacted for the payment of such amounts or in the manner, time or amount thereof. Further, the amount payable to the paying agent does not constitute an additional source of revenues available to the City.

Debt Statements

The City must report all new authorizations of debt or changes in previously authorized debt to the Division through the filing of Annual and Supplemental Debt Statements. The Supplemental Debt Statement must be submitted to the Division of Taxation before final passage of any debt authorization. Before January 31, of each year the City must file an Annual Debt Statement with the Division. This report is made under oath and states the authorized, issued, and unissued debt of the City as of the previous December 31. Through the Annual and Supplemental Debt Statements, the Division monitors all local borrowing. The City’s Annual Debt Statement as of December 31, 2015 was filed on January 29, 2016.

Overlapping Debt

Several regional and City agencies have issued debt for the payment of which the City and its taxpayers are responsible in varying degrees. A description of those agencies and the relationship of each to the City follow.

County of Essex

The County of Essex, directly and indirectly through the Essex County Improvement Authority, has issued various bonds, notes and other obligations payable ultimately from taxes levied upon all taxable properties within the County of Essex, a portion of which is allocated to properties within the City. Accordingly, such debt constitutes overlapping debt with respect to properties within the City. As of December 31, 2014, the County had $1,011,553,249 in outstanding debt and $333,048,249 in

A-18 outstanding net debt. The City’s percentage of County debt of 15.97% is based on the equalized valuation of City properties as a percentage of the total county equalized valuation (see table on page A- 23 for more information on the City’s overlapping debt).

Board of Education of the City of Newark

Prior to the takeover of operations by the State, the Board of Education of the City of Newark (the “Board of Education”) issued various bonds, notes and other obligations payable ultimately from taxes levied upon all taxable properties within the School District, which is coextensive with the boundaries of the City. Accordingly, such debt constitutes overlapping debt with respect to properties within the City. As of the date of this Official Statement, the Board of Education has no debt outstanding.

Passaic Valley Sewerage Commission

The Passaic Valley Sewerage Commission (the “PVSC”) was created on March 27, 1902 by legislative action of the State of New Jersey as a corporate body politic established for the purpose of developing a plan for eliminating pollution from the streams and rivers within the Passaic River valley drainage area extending from the Great Falls in Paterson to Newark Bay. The boundaries of the sewerage district known as the Passaic Valley Sewerage District includes portions of Essex, Passaic, Bergen, and Hudson Counties. Nine (9) Commissioners are appointed by the Governor with the advice and consent of the State Senate. Of the nine (9) Commissioners, each County within the Passaic Valley Sewerage District is represented by two (2) Commissioners, both of whom reside in the sewerage district and in the County they represent. At least one (1) of the two (2) Commissioners from each County must reside in a contracting municipality or in a leasing municipality. Not more than five (5) of the nine (9) members of the PVSC shall be from the same political party. The ninth member shall be an at-large member who shall serve during the term of office of the Governor of the State. Each Commissioner serves for a term of five (5) years or until his successor is appointed, except for the at-large member.

State law provides that municipalities may enter into agreements with the PVSC for the construction, maintenance, and operation of sewerage plants and works, in addition to trunk or main sewage lines. The actual construction and operation of these facilities remain within the jurisdiction of the PVSC. The cost of construction and operation of the system is apportioned annually to the respective contracting municipalities and other users of the system according to their total flow and wastewater quality.

The original Passaic Valley Sewerage System (the “System”) consisted of a primary treatment plant and steam powered pumping station located near Newark Bay, an interceptor sewer running parallel to the Passaic River between Paterson and Newark Bay, and an outfall into New York Harbor. Since completion of these original facilities in 1924, the PVSC has made numerous modifications to improve treatment and increase capacity. Construction of the secondary treatment facility, which is the principal component of the System, was initiated in 1977 and completed in 1985. The interim sludge handling facilities constructed in 1990 are the most recent addition to the System. In the 1990’s, various capital improvements and upgrades were completed. The outstanding principal amount of senior debt issued by the PVSC as of December 31, 2015 is $153,735,000 and $111,809,637 in subordinated debt (see table on page A-23 for more information on the City’s overlapping debt).

North Jersey District Water Supply Commission

The City is a member by contract of the North Jersey District Water Supply Commission (the “Commission”) that is authorized to supply and distribute water to twelve member municipalities comprising the Commission. The Commission is empowered to finance, construct, and operate facilities necessary for the treatment, filtration, transmission, and distribution of water to municipalities that may desire to participate in a water supply project. The Commission consists of a board of seven (7) members A-19 appointed by the Governor with the advice and consent of the State Senate for terms of four (4) years. The Commission developed the Wanaque North Project, the operation of which is governed by an agreement executed on December 28, 1940 between the Commission and the participating municipalities. Newark’s allotment of water from the Wanaque North Project is approximately 38.07 million gallons per day or 40.5 percent of the daily yield of the Wanaque Reservoir System.

The Wanaque South Project is a joint undertaking of the Commission and SUEZ North America, formerly United Water New Jersey. This project was designed to increase substantially the water supply available to the co-owners and to relieve the threat of a water crisis in northeastern New Jersey. 50 percent of the additional water supply is available to the Commission for distribution to the Wanaque South participants, including the City. As of December 31, 2014, the Commission had $19,581,146 in outstanding bonds for the Wanaque North Project and as of December 31, 2014 the Commission had $16,913,785 in outstanding bonds for the Wanaque South Project (see table on page A-23 for more information on the City’s overlapping debt).

Essex County Improvement Authority

Other than the several occasions where the City has participated in financing programs through the Essex County Improvement Authority (the “Improvement Authority” or “ECIA”) as a direct borrower, the additional overlapping debt of the Improvement Authority, if guaranteed by the County, is covered in the gross debt of the County as noted in this section. For the City’s direct debt under the ECIA, see “Total Debt Service Schedule for City General Obligation Bonds” herein.

In December 2010, the City entered into a sale-leaseback transaction with the ECIA, whereby the City sold 16 City buildings to the ECIA, and the ECIA undertook to make certain capital improvements to such buildings and to lease such improved buildings back to the City. To finance the cost of such acquisition and improvements, the ECIA issued $74,080,000 in lease revenue bonds, which are payable solely from lease-purchase payments to be made by the City over a 20-year period. This transaction resulted in the economic defeasance of approximately $8 million in City obligations and inclusion into the City’s 2010 fiscal year budget of approximately $39.6 million in net sale proceeds, with a resulting annual lease payment obligation of approximately $6.7 million per year through 2030.

Newark Downtown District

The Newark Downtown District (the “NDD”) is a special improvement district which was formed by the City as a means of providing additional services, which additional services are funded by annual assessments against properties located within the NDD. The NDD is managed by the Newark Downtown District Management Corp. (the “NDDMC”), a nonprofit corporation. In 2007, the New Jersey Economic Development Authority (the “NJEDA”) issued $10 million in bonds for the purpose of financing various improvement projects of the NDDMC secured by annual assessments generated within the NDD, but such NJEDA bonds are not otherwise secured by the City. As of December 31, 2015, the NDD has $8,580,000 in outstanding bonds.

A-20 Statutory Debt

The following chart shows the net statutory debt for the City as of December 31, 2015:

STATUTORY DEBT AS OF DECEMBER 31, 2015

Gross Debt Deductions(1) Net Debt School Purposes $ 73,253,000 $ 73,253,000 $ 0 Combining Water/Sewer Utility 178,498,412 178,498,412 56,939,423 Municipal Purposes 383,266,274 86,562,035 296,704,239 Total $ 635,017,686 $ 338,313,447 $ 296,704,239

Avg. Equalized Valuation of Real Property (Years 2013-2015) $13,476,471,954

Statutory Net Debt Percentage 2.202% ______(1) Deductions from gross debt are allowed in accordance with the Local Bond Law which allows a deduction from gross school purposes of an amount equal to 8% of average equalized valuations and for any Additional State School Building Aid Bonds authorized. The deduction from municipal gross debt represents bonds issued to meet cash grants-in-aid for a housing authority, redevelopment agency, or municipality acting as its local public agency, and cash on hand to pay refunded bonds.

State law also provides for deduction from gross debt of the bonds outstanding of a “self-liquidating” utility. Section 40A:2-45 of the New Jersey statutes defines a self-liquidating utility as having receipts in a fiscal year sufficient to meet operating and maintenance costs and debt service, without drawing on fund balances carried forward from prior years.

Certain other obligations of the City, such as its obligation to make periodic lease or capital grant payments under housing authority bond issues (such as the $63,300,000 of outstanding Housing Authority of the City of Newark City-Secured Police Facility Revenue Bonds (South Ward Police Facility), Series 2009A) and $52,527,035 in Pension Refunding Bonds of 2003, 2008 and 2013 are currently either excluded or deducted from the statutory debt calculations.

Source: City of Newark 2015 Annual Debt Statement

A-21 Debt Incurring Capacity

The following chart shows the debt incurring capacity of the City as of December 31, 2015:

Municipal: 1. Average Equalized Valuation of Real Property (Years 2013-2015) $13,476,471,954

2. 3.5% Borrowing Margin (3-year average of Equalized Valuations) $471,676,518

3. Net Debt Issued and Outstanding and Authorized and Unissued (including refunding bonds) $296,704,239

4. Available Borrowing (Line 2 minus Line 3) $174,972,279

School: 5. 8% Borrowing Margin (3-year average of Equalized Valuations) $1,078,117,756

6. Debt Issued and Outstanding and Authorized and Unissued $73,253,000

7. Available Borrowing Margin - School (Line 5 minus Line 6) $1,004,864,756

______Source: City of Newark 2015 Annual Debt Statement

A-22 Overlapping Debt of the City of Newark as of 12/31/2014

Percentage allocated to Dollar amount Outstanding Net Debt the City(2) allocated to the City County of Essex $ 333,048,249 15.97% $ 53,187,805

Passaic Valley Sewerage Commission(1)

Senior Bonds 164,150,000 28.19% 46,263,885 Subordinated Bonds 124,588,473 28.19% 35,121,491

North Jersey District Water Supply Commission

Wanaque South Project 19,581,146 28.68% 5,615,873 Wanaque North Project 16,913,785 40.50% 6,850,083

TOTAL $ 658,281,653 $ 147,049,137

(1)Newark's percentage includes flow to East Orange and Hillside (2)The City’s allocation is subject to change based on actual usage

______Source: 2014 Audited Financial Statements for County of Essex, Passaic Valley Sewerage Commission and North Jersey District Water Supply Commission

A-23 Total Debt Service Schedule for City General Obligation Bonds1 2

The following table sets forth the total debt service (principal and interest) payable on General Obligation Bonds of the City that are paid through annual budget appropriations as of the date of this Official Statement.

General Sewer Utility Total Obligation Water Utility Bonds Outstanding Bonds3 Bonds4 School Bonds5 (NJEIT)6 ECIA Bonds Debt 2016 $33,173,089 $4,425,414 $9,064,478 $6,275,302 $8,270,536 $61,208,818 2017 36,292,990 4,338,927 8,945,255 6,280,894 8,272,131 64,130,196 2018 36,340,340 4,278,866 6,787,005 6,248,311 8,270,961 61,925,482 2019 34,782,338 4,206,829 6,780,905 6,204,241 8,267,736 60,242,048 2020 33,046,960 3,644,352 6,782,155 6,210,180 8,266,261 57,949,907 2021 31,192,503 3,587,629 6,787,155 6,165,279 7,975,486 55,708,052 2022 30,387,737 2,909,656 6,802,700 6,184,863 7,953,840 54,238,796 2023 30,210,919 2,899,572 6,826,463 6,128,337 7,962,817 54,028,107 2024 30,058,407 2,878,798 6,853,988 6,124,241 7,955,589 53,871,023 2025 29,913,782 2,861,309 6,886,500 6,063,184 8,271,850 53,996,625 2026 29,756,132 2,854,775 477,500 4,547,216 8,316,574 45,952,197 2027 29,608,569 2,829,331 467,750 4,512,361 8,315,821 45,733,832 2028 29,466,294 2,287,546 462,500 2,267,837 7,613,506 42,097,683 2029 20,439,394 1,573,101 451,500 2,272,637 7,607,522 32,344,154 2030 13,726,774 857,439 - 1,402,218 6,718,850 22,705,281 2031 11,166,313 367,100 - 674,536 - 12,207,948 2032 11,522,763 365,350 - 672,786 - 12,560,898 2033 11,904,300 368,100 - 702,302 - 12,974,702 2034 5,709,463 370,100 - - - 6,079,563 2035 5,742,888 371,350 - - - 6,114,238 2036 5,768,600 373,850 - - - 6,142,450 2037 4,481,750 375,500 - - - 4,857,250 2038 4,483,500 378,300 - - - 4,861,800 2039 - 381,150 - - - 381,150 $509,175,800 $49,784,343 $74,375,853 $78,936,726 $120,039,478 $832,312,201

1 Includes Type I and State-operated School District bonds paid through City budget appropriation 2 The above schedule does not include any Bond Anticipation Notes or other short term note obligations 3 All General Obligation Bonds are covered under the Municipal Qualified Bond Act, Title 40A of the New Jersey Statutes, N.J.S.A. 40A:3-1, et seq., with the exception of the Housing Authority of the City of Newark City-Secured Police Facility Revenue Bonds (South Ward Police Facility) Series 2009A and a State loan 4 A portion of the City’s Water Utility Bonds are covered under the Municipal Qualified Bond Act, Title 40A of the New Jersey Statutes, N.J.S.A. 40A:3-1, et seq. 5 All School Bonds are covered under the School Qualified Bond Act, School Qualified Bond Act, Title 18A of the New Jersey Statutes, N.J.S.A. 18A:24-85 et seq. 6 A portion of the Sewer Utility Bonds (NJEIT) are covered under the Municipal Qualified Bond Act, Title 40A of the New Jersey Statutes, N.J.S.A. 40A:3-1, et seq.

A-24 CITY FINANCIAL PROCEDURES

The Municipal Budget Process

The municipal operating budget process includes submission of the budget by the Mayor to the Municipal Council, its approval and adoption by the Municipal Council, and its certification by the Director of Local Government Services and subsequent certification of tax rate by the County of Essex. This process is governed by City charter and State statute. According to the City charter, the Mayor is to prepare his budget for submission to the Municipal Council on or before January 15. The Department of Administration under the direction of the Business Administrator is charged by the Mayor with responsibility for the initial formulation of the budget. This work is carried out by the Office of Management and Budget under the supervision of the Budget Director, who is responsible for compiling the budget document in accordance with policies established by the Mayor. The statute requires the budget to be in line-item format.

The budgetary process consists primarily of modification and review by the Office of Management and Budget of appropriation requests of the City’s various departments and agencies. Revenue estimates are provided by the Department of Finance and are based on the previous year’s receipts and instructions from the State as to what level of revenue may be anticipated.

The Municipal Council must initially introduce the budget by February 10 after which it is advertised and reviewed at public hearings held by the Municipal Council. After the close of the public hearings, and, provided certification of the Director of Local Government Services approving the budget has been received, the Municipal Council may adopt the budget, provided there are no amendments that statutorily require advertisement and a public hearing.

In order to provide for expenditures to be made in the period commencing January 1 and ending with the adoption of the regular budget, temporary appropriations must be made by the Municipal Council by resolution adopted prior to January 31 and are generally limited to 26.25% of the total appropriations made for all purposes during the preceding year. The 26.25% limit may be waived by the Director of Local Government Services for specific items falling due during the temporary budget period. Debt service, capital improvements, and public assistance payments are exempt from such limits. Appropriations for interest and principal payments coming due during this period in time must be made in full.

The 2011 Budget was adopted on September 29, 2011. The 2012 Budget was adopted on October 16, 2012. The 2013 Budget was adopted on September 10, 2013. The 2014 Budget was adopted on behalf of the City by the Local Finance Board on October 14, 2014. The 2015 Budget was adopted on behalf of the City by the Local Finance Board on September 22, 2015. The 2016 Budget was introduced by the City on May 18, 2016 and is expected to be adopted in the third quarter of 2016.

Limitations on Expenditures (The Cap Law)

Section 40A:4-45.3 of the Local Budget Law, commonly referred to as the “CAP” law, provides that municipalities are prohibited by law from increasing their final appropriations (the budget) over the previous year’s final appropriations by more than 2.5% or the “cost-of-living” adjustment (the rate of annual percentage increase in the Implicit Price Deflator for State and Local Government Purchases of Goods and Services), whichever is less, subject to certain exceptions, including all debt service requirements of a municipality.

The current exceptions to the CAP law, which has been amended from time to time, are as follows:

A-25 1) Capital expenditures, including appropriations for current capital expenditures, whether in the capital improvement fund or as a component of a line item elsewhere in the budget, provided that any such current capital expenditure would otherwise be bondable under the Local Bond Law

2) An increase based upon an emergency temporary appropriation to meet an urgent situation or an emergency appropriation made pursuant to the Local Budget Law

3) Most debt service requirements

4) Cash deficits of prior years, subject to the approval of the Local Finance Board in the Division of Local Government Services

5) Amounts reserved for uncollected taxes

6) Appropriations related to new or increased service fees imposed by municipal ordinances

7) When approved by referendum

8) Amounts required to be paid pursuant to any contract with respect to use, service, or provision of any project facility or public improvement for water, sewer, solid waste, parking, senior citizen housing or similar purpose or payments on account of debt service therefor between other political subdivisions of the State

9) Programs funded in whole or in part by Federal or State funds and amounts received or to be received from Federal, State, or other funds in reimbursement for local expenditure

10) Amounts expended to fund a free public library established pursuant to a provision of law

11) Amounts expended in preparing and implementing a housing element and fair share plan pursuant to the provisions of P.L. 1985, C. 222 and any amounts received by a municipality under a regional contribution agreement pursuant to Section 12 of that act

12) Amounts expended to aid privately owned libraries and reading rooms

13) Extraordinary expenses, approved by the Local Finance Board, required for the implementation of an interlocal service agreement

14) Any expenditure mandated as a result of a natural disaster, civil disturbance, or other emergency that is specifically authorized pursuant to a declaration of an emergency by the President of the United States or the Governor of the State

15) Expenditures for the cost of services mandated by any order of court, by any Federal or State statute, or by administrative rule, directive, order or other legally binding device issued by a State Agency

16) Expenditures of amounts actually realized in the Local Budget Year from the sale of municipal assets in extraordinary cases and with the permission of the Local Finance Board

17) Any Local Unit which is determined to be experiencing fiscal distress pursuant to the provisions of P.L. 1987, C. 75 and which has available surplus pursuant to the spending limitations imposed by P.L. 1976, C. 68, may appropriate and expend an amount of that surplus approved by the Director and the Local Finance Board

A-26 18) Newly authorized operating appropriations expended for the staffing and operations of the municipal court when approved by the vicinage Presiding Judge of the Municipal Court

19) Expenditures related to the cost of conducting and implementing a total property tax levy sale, subject to the approval of the Local Finance Board

20) Amounts expended for a length of service award program

21) Amounts expended to provide municipal services or reimbursement amounts to multifamily dwellings with respect to solid waste collections

22) Amounts expended under an interlocal services agreement

23) Amounts expended under a joint municipal contract

24) Amounts required to be paid by a municipality in connection with the recycling tax imposed on owners and operators of solid waste facilities.

Under the Cap Law, any emergency appropriation as defined in Section 40A:4-46 of the Local Budget Law, must be set forth by resolution and must be approved by at least two-thirds of the governing body and must be approved by the Director of the Division. Supplemental appropriations made after the adoption of the budget and determination of the tax rate may be authorized by the governing body of the municipality. However, with minor exceptions, such appropriations must be included in full in the following year’s budget.

For budget years beginning before July 1, 2012, N.J.S.A 40A:4-45.3e permits increases in appropriations for increased health insurance costs in excess of 4% (but not more than the average percentage increase of the State Health Benefits Program). The “Cap Law” is subject to amendment by the State Legislature.

See, also, “ASSESSMENT AND COLLECTION OF TAXES - Property Tax Reform” below for a description of the separate tax levy cap which was enacted in 2007 and substantially amended in 2010.

Anticipation of Real Estate Taxes

In regard to current taxes, “receipts from the collection of taxes levied or to be levied by the municipality, or in case of a county for general county purposes and payable in the fiscal year, shall be anticipated in an amount which is not in excess of the percentage of taxes levied and payable during the next preceding fiscal year which was received in cash by the last day of such preceding fiscal year.” (Section 40A:4-41 of the Local Budget Law)

This provision requires that an additional amount (the “Reserve for Uncollected Taxes”) be added to the tax levy required to balance the budget so that when the percentage of the prior year’s tax collection is applied to the combined total the product will at least equal the tax levy required to balance the budget.

Section 40A:4-29 of the Local Budget Law sets limits on the anticipation of delinquent tax collections: “The maximum which may be anticipated is the sum produced by the multiplication of the amount of delinquent taxes unpaid and owing to the local unit on the first day of the current fiscal year by the percentage of collection of delinquent taxes for the year immediately preceding the current fiscal year.”

The City school district and the County receive 100% of their tax levies, which are collected and paid to them by the City.

A-27 Anticipation of Miscellaneous Revenues

Section 40A:4-25 of the Local Budget Law provides that “No miscellaneous revenues from any sources shall be included in the anticipated revenue in the budget in an amount in excess of the amount actually realized in cash from the same source during the next preceding fiscal year, unless the Director shall determine upon application by the governing body that the facts clearly warrant the expectation that such excess amount will actually be realized in cash during the fiscal year and shall certify such determination, in writing, to the local unit.”

Deferral of Current Expenses

Supplemental appropriations made after the adoption of the budget and determination of the tax rate may be authorized by the governing body of the City. However, with minor exceptions, such appropriations must be included in full in the following year’s budget. Under the Cap Law, Section 40A:4-45.3a of the Local Budget Law, any emergency appropriation must be declared by resolution according to the definition provided in Section 40A:4-46 of the Local Budget Law, must be approved by at least two- thirds of the governing body and must be approved by the Director of the State Division of Local Government Services.

Audit Requirement

The Local Fiscal Affairs Law requires that every municipality have an annual audit of its books and accounts to be completed within six months after the close of its fiscal year. The City’s audit has historically been completed approximately 12 months after the close of the fiscal year. The audit must be conducted by a registered municipal accountant and the audit report must be filed with the municipal clerk and with the Director of the Division of Local Government Services. (N.J.S.A. 40A:5-4 through 40A:5-10). The audit for the year ended December 31, 2014 was completed on August 12, 2015. It is expected that the audit for the year ended December 31, 2015 will be completed in the third or fourth quarter of 2016.

The City’s accounting methods conform to practices prescribed by the Division, which practices differ in some respects from generally accepted accounting principles. See Appendix B “City of Newark Auditor’s Report and Financial Statements” and the notes thereto for a description of the City’s accounting policies.

STATE AID PROGRAMS

The State of New Jersey provides financial support to local governments through various programs aimed at reducing reliance on the local property tax base.

A-28 Aid for School Debt Service

Based on the then-existing foundation aid formulas, the State has provided a percentage of the City’s annual debt service requirement for Type I and for Type II State-Controlled school district bonds as follows:

Debt Service Requirements State Not Including Assistance State Assistance City Ch. 177, Ch. 10 Under P.L. as Percentage Fiscal Year and Ch. 74 Bonds 1975, c. 212 of Debt Service 2015* $10,664,818 $5,448,045 51.1% 2014 10,764,000 5,448,645 50.6 2013 11,501,618 5,916,458 51.4 2012 14,179,455 7,515,706 53.0 2011 14,890,602 7,258,368 48.7

*Unaudited

On January 7, 2008, the New Jersey Legislature passed a comprehensive revision to the school funding formula applicable to local school districts. Such legislation was approved by the Governor on January 13, 2008, and first applied to the 2008-2009 school year.

The new funding formula provides a more streamlined approach, consolidating 23 aid categories into 8. The formula calculates aid based on the student population rather than district location, in order to distribute aid equitably during periods of changing demographics and enrollment shifts. The formula also allocates additional resources to support students who live in districts with high concentrations of poverty, regardless of the school district location. The adequacy budget is determined by enrollment data. Once the adequacy budget is identified, the portion of the adequacy budget that will be paid for by the State and the portion paid for by the local taxpayers is determined using a calculation that is part of the funding formula, giving consideration to the districts’ ability to pay. The new funding formula also includes a revised calculation for special education services that will provide increases in aid for special education students and include reforms to Extraordinary Special Education Costs Aid.

Distributed Taxes

The State collects various taxes for distribution to local governments. The proceeds are apportioned and distributed each year, according to a formula based upon the location, value of utility property, and sales. The State also collects certain taxes on financial businesses, banking corporations, and insurance companies for appropriation and distribution to the municipalities in which they do business.

State Aid

Beginning with State fiscal year 1996, the State has consolidated many of the municipal aid programs into a single program called the “Consolidated Municipal Property Tax Relief Act” (“COMPTRA”). The amount received by the City under COMPTRA has been approximately the same as the total received from the component aid and grant programs in the year preceding COMPTRA. The State’s 2010 Budget for the City’s fiscal year 2009 included an approximately $118.7 million allocation to the City, which included $12 million in Special Municipal Aid, a 4.65% decrease from the prior fiscal year. The State’s 2011 Budget for the City’s fiscal year 2010 included an approximately $91.3 million allocation to the City, an approximately 2.3% decrease from the City’s fiscal year 2009. The State’s 2012 Budget for the City’s fiscal year 2011 included an approximately $91.3 million allocation to the City

A-29 (level with the preceding year), and an additional $32 million in State assistance was provided under the hereafter defined 2011 MOU. See “CITY FINANCIAL SCHEDULES – 2011 Budget” herein. The State’s 2013 Budget for the City’s fiscal year 2012 included an approximately $91.3 million allocation to the City (level with the preceding year), and an additional $10 million in State assistance was provided under the Transitional Aid program. See “CITY FINANCIAL SCHEDULES – 2012 Budget” herein. The State’s 2014 Budget for the City’s fiscal year 2013 included an approximately $101.3 million allocation to the City (level with the combined State Aid and Transitional Aid received by the City in the preceding year), and the City was advised that an additional $15 million would be received from separate State sources (such additional amount was not received by the City). The State’s 2015 Budget for the City’s fiscal year 2014 included an approximately $101.3 million allocation to the City (level with the State Aid received by the City in the preceding year). The City did not apply for Transitional Aid for the City’s fiscal year 2013. The City’s adopted budget for fiscal year 2014 included an allocation of $10 million in Transitional Aid. The City entered into a Memorandum of Understanding in connection with its receipt of such Transitional Aid in 2014. See “CITY FINANCIAL SCHEDULES - 2014 Budget” herein. The City’s 2015 Budget included an allocation of $10 million in Transitional Aid. The City’s 2016 introduced budget anticipates $10 million in Transitional Aid.

The State has announced that, as in previous years, five percent (5%) of State assistance will be withheld from municipalities which fail to achieve a sufficient score on a best practices inventory promulgated by the State. No State assistance has previously been withheld to the City on this basis, and the City believes that no such withholding shall apply to the projected State assistance for the City’s 2016 fiscal year.

Tax Exemption Reimbursement

The State reimburses municipalities for the full cost of mandated property tax deductions and exemptions for certain categories of taxpayers ($100 per year for veterans and/or disabled citizens and $250 per year for senior citizens).

Welfare

The State pays the entire non-federal share of Medicaid. New Jersey municipalities have no financial responsibility to fund these programs. The State also makes aid payments to counties with above-average welfare burdens. Effective July 1, 2008, the General Assistance administrative component was transferred to the County of Essex. The City now bears no cost for the program.

Transit

The subsidization of mass transit is the responsibility of the State. The municipalities are not required to make financial contributions.

College Aid

The State subsidizes the system of State colleges and universities, with no obligation for municipal financial assistance. County colleges are supported by county governments with State assistance. Municipalities have no financial responsibility for the county college system.

Other

The State mandates a variety of smaller programs of grants-in-aid to municipalities in such areas as housing, neighborhood preservation, health, recreation, and social services.

A-30 CITY FINANCIAL SCHEDULES Financial Statements

The City’s audited financial statements for the fiscal years ending December 31, 2014, 2013, 2012, and 2011 (the “Audited Financial Statements”) along with the unaudited financial statements for December 31, 2015 are set forth in APPENDIX B. The Audited Financial Statements have been audited by Samuel Klein and Company, Certified Public Accountants, Newark, New Jersey, an independent auditor (the “Auditor”), as stated in its report appearing in APPENDIX B to this Official Statement. See “APPENDIX B – City of Newark Auditor’s Report and Financial Statements.”

2011 Budget

The City adopted its annual budget for 2011 on September 29, 2011. The 2011 budget contained municipal purpose appropriations of $571,011,223.47, representing a 4.74% decrease from 2010 appropriations. The 2011 budget included an overall 9.98% increase in the municipal purpose tax levy, producing additional annual revenues of approximately $18 million. Total formula State aid to the City was $91,290,117, which was identical to the amount received by the City in 2010, and approximately 14% less than the approximately $106,707,547 received in 2009. The City continued the fiscal initiatives described above under the subheading “2010 Budget and Fiscal Initiatives of the City”, including the issuance of approximately $70 million in tax anticipation notes payable in the subsequent fiscal year (representing a reduction of approximately $5 million from the tax anticipation note balance carried into 2011 from the previous fiscal year). All of such notes were retired prior to maturity in December 2011.

In preparing the City’s budget for fiscal year 2011, the City again faced a large structural budget gap. The adopted budget anticipated the receipt of $32 million in financial assistance from the State during the fourth quarter of 2011. The City entered into a Memorandum of Understanding (the “2011 MOU”) with the State in connection with the receipt of such assistance, which was provided in the form of a forgivable loan, the repayment of which has since been forgiven.

2012 Budget

The City adopted its annual budget for 2012 on October 16, 2012. The 2012 budget contained municipal purpose appropriations of $569,680,000, representing a 0.24% decrease from 2011 appropriations. The 2012 budget included an overall 5.17% increase in the municipal purpose tax levy, producing additional annual revenues of approximately $10 million. Total formula State aid to the City was $91,290,117, which was identical to the amount received by the City in 2011. The City continued the fiscal initiatives described above under the heading “2010 Budget and Fiscal Initiatives of the City”, including the issuance of $60 million in tax anticipation notes payable in the subsequent fiscal year (representing a reduction of approximately $10 million from the amount of tax anticipation notes that were issued in 2011). $20 million of such notes were retired prior to maturity in December 2012, and the remaining $40 million was paid at maturity in the subsequent fiscal year.

In preparing the City’s budget for fiscal year 2012, the City again faced a large structural budget gap. The adopted budget anticipated the receipt of $10 million in financial assistance from the State during the fourth quarter of 2012, through the State’s Transitional Aid program for the State’s 2013 fiscal year. Such assistance was provided in the form of a grant, but with the condition that the City be required to appropriate as a repayment to the State in the City’s 2013 budget all funds above $10 million that were available to be used as a revenue in support of the 2013 budget according to the City’s 2012 annual financial statement. Although the City’s audited financial statements reflect a year-end fund balance of approximately $11.4 million, no such repayment was required.

The City entered into a Memorandum of Understanding (the “2012 MOU”) with the State in connection the receipt of Transitional Aid in 2012. The 2012 MOU required the City to obtain the prior A-31 consent of the Director of the Division of Local Government Services (the “Division”) before taking certain fiscal actions, including (but not limited to) new hiring, expansion of municipal services, certain contracts and bond authorizations, and granting of tax abatements. The City was also required to adhere to certain contracting procedures, and present a transition plan detailing how the City intended to eliminate its reliance on special State assistance.

With the permission of the Division, the City included the proceeds of an accelerated tax sale, originally scheduled to occur in December 2012 but which was delayed until January 2013, in the City’s financial statements for the 2012 fiscal year as if received by December 31, 2012. Approximately $3 million in proceeds were so included in the City’s 2012 financial statements. One impact of holding an accelerated tax sale is that failure to hold accelerated tax sales in any succeeding year would have the effect of receiving less than a full year of tax revenues in that subsequent year.

2013 Budget

The City adopted its annual budget for 2013 on September 10, 2013. Such budget did not include participation in the Transitional Aid program. Accordingly, the 2012 MOU terminated by its terms on December 31, 2013. The 2013 budget contained municipal purpose appropriations of $583,447,177, representing a 2.42% increase over 2012 appropriations. The 2013 budget included an overall 5.33% increase in the municipal purpose tax levy, producing additional annual revenues of approximately $9.5 million. Total formula aid to the City was $101,290,117, which was a $10 million increase over the amount received by the City in 2012. The City continued the fiscal initiatives described under the heading “2010 Budget and Fiscal Initiatives of the City”, including the issuance of $54.95 million in tax anticipation notes payable in the subsequent fiscal year (representing a reduction of approximately $5 million from the amount of tax anticipation notes that were issued in 2012). $5 million of such notes were retired prior to maturity in December 2013, and the remaining $49.95 million was paid at maturity in the subsequent fiscal year.

In preparing the City’s budget for fiscal year 2013, the City again faced a large structural budget gap. The adopted budget did not anticipate (and the City did not apply for) the receipt of Transitional Aid. See “CITY FINANCIAL CONDITION AND STATE SUPERVISION – 2013 Operational Deficit and State Supervision of City Finances” for a discussion of the approximately $30.1 million cash deficit for 2013 which is reflected in the City’s audited financial statements for such fiscal year.

2014 Budget

The City faced extraordinary challenges to the adoption of a balanced cash basis budget for its 2014 fiscal year. At the joint request of the City and the Division, on October 6, 2014, the Superior Court of New Jersey, Law Division entered a judgment that there had been a gross failure to comply with the provisions of the Local Budget Law (N.J.S.A. 40A:4-1 et seq.) (specifically, the inability of the City to prepare a cash basis budget for fiscal year 2014) which substantially jeopardized the fiscal integrity of the City. Such judgment provided the basis for the Director of the Division to convene a public hearing of the Local Finance Board, which was held on October 8, 2014. At the conclusion of such hearing, the Local Finance Board adopted a resolution determining that the City be subject to supervision pursuant to Article 4 of the Local Government Supervision Act of 1947, P.L. 1947, c.151, as amended by P.L. 1981, c.211 and set forth as N.J.S.A. 52:27BB-54 et seq. (the “Supervision Act”), and enumerating the specific statutory powers to be assumed by the Director and/or the Local Finance Board in respect of the City’s fiscal affairs. The resolution became effective on October 9, 2014 following approval by certain State cabinet officers, whereupon the State’s fiscal supervision of the City took effect.

The terms of State supervision over the City’s finances provide generally for Director approval and/or supervision over, among other things, the issuance and liquidation of bonds and other obligations, municipal expenditures and appropriations, appointment and dismissal of managers, and supervision of A-32 revenue administration. The Director may also act as controller, and provide for the appointment of a fiscal control officer for the municipality. The Director may also authorize the City to exceed certain statutory spending limitations, liquidate or refinance current debt, and appropriate less than the full amount required to be included in the budget for certain deferred charges and statutory expenditures. The specific supervisory powers are set forth in N.J.S.A. 52:27BB-57, -58, -60, -61, -62, -66, -66.1, -73, -74, - 75, -76, -77, -78, -79, -80, -81, -82, -83, -84, -85, -86, -87, -88, -89 and -90. To remain effective, the Local Finance Board resolution (and cabinet officer approvals) that placed the City under supervision must be renewed each year.

2015 Budget

The City faced challenges to the adoption of a balanced cash basis budget in 2015. Under the powers conferred under the Supervision Act, on September 22, 2015 the Local Finance Board adopted a balanced 2015 operating budget, reflecting, among other things, the receipt of $10 million in Transitional Aid from the State, an approximately 8.67% increase in the City’s municipal property tax levy and a ten- year amortization of the 2013 deficit and 2014 deficit.

In connection with the City’s receipt of $10 million in Transitional Aid from the State in 2015, the City entered into another Memorandum of Understanding with the Division (the “2015 MOU”). As with the 2014 MOU, the 2015 MOU requires the City to obtain the prior consent of the Director before taking certain actions, including (but not limited to) new hiring, employee raises and promotions, expansion of municipal services, certain contracts and bond authorizations, and granting of tax abatements. The City is also required to adhere to certain contracting procedures, report to the Division on its progress toward implementing recommendations from State-commissioned performance audits, and present a transition plan detailing how the City intends to eliminate its reliance on special State assistance. The 2015 MOU shall continue in effect until the City adopts a budget that does not have a structural imbalance that is greater than 5% as determined by the Director, and may be replaced by a subsequent Memorandum of Understanding in respect of any Transitional Aid as may be awarded in connection with A-33 its FY2016 budget. The City currently anticipates that it will remain under State supervision for the foreseeable future.

The City’s 2015 Annual Financial Statement, representing the City’s unaudited financial statements for the fiscal year, ended December 31, 2015, reflected a fund balance of approximately $29.5 million. This fund balance resulted chiefly from a net increase in realized revenues of approximately $11.2 million from the amount budgeted, unexpended balances of budgeted appropriations in 2015 of approximately $12 million, prior year interfunds returned in 2015 of approximately $4.7 million and unexpended balances of 2014 budgeted appropriations of approximately $3.4 million. The 2015 Annual Financial Statement was filed with the Municipal Securities Rulemaking Board (the “MSRB”) on March 17, 2016 and the City’s unaudited financial statements for the year ended December 31, 2015 are incorporated in Appendix B herein. See APPENDIX B – “AUDITOR’S REPORT, FINANCIAL STATEMENTS AND NOTES TO FINANCIAL STATEMENTS” herein.

2016 Budget

On April 19, 2016, the City issued $54,905,000 principal amount of Tax Anticipation Notes that mature on February 15, 2017. Although the City presently enjoys market access to sell its short-term notes, there can be no assurance that the City will be successful in any such future sale of its tax anticipation notes. The current State budget (which expires on June 30, 2016) contains certain provisions which may provide relief for issuers of maturing bond anticipation notes and tax anticipation notes. One such provision authorizes a municipality (with the approval of the New Jersey Local Finance Board) to pledge funds appropriated as State Aid and payable to the municipality, as a guarantee for payment of principal of and interest on any of its bond anticipation notes or tax anticipation notes. Another provision authorizes the State Treasurer, in consultation with the Commissioner of the Department of Community Affairs, to direct the Director of the Division of Budget and Accounting to provide a loan for a term not to exceed 30 days to a municipality faced with a fiscal crisis, including but not limited to a potential default on tax anticipation notes. No assurance can be given that these or similar provisions of the current State budget will be included in any future State budget.

The most significant recurring revenue initiative continues to be the increase in the annual municipal property tax rate. In 2010, the City increased its municipal property tax rate by 16%, producing additional annual revenues of approximately $34.6 million. In 2011, the City increased its municipal property tax rate by 9.98%, producing additional revenues of approximately $18 million. In 2012, the City increased its municipal property tax rate by 5.17%, producing additional revenues of approximately $10 million. In 2013, a Citywide reassessment was implemented, enabling the City to reduce its municipal property tax rate by 11.77%, but resulting in the production of additional revenues of approximately $9.5 million. In 2014, the City increased its municipal property tax rate by 8.66%, producing additional revenues of approximately $7.8 million. In 2015, the City increased its municipal property tax rate by 9%, producing additional revenues of approximately $17 million.

Current Fund Balances, Revenues and Expenditures

The Current Fund is used to account for the resources and expenditures for governmental operations of a general nature, including debt service on general purpose bonds and notes. The fund balance in the Current Fund as of December 31 of each year is comprised of cash, investments, and A-34 certain receivables. Under State law, only the amount of the Current Fund balance held in cash or quick assets may be included as anticipated surplus in the succeeding fiscal year’s budget, unless the Director of the Division of Local Government Services gives written consent to an exception.

The City’s Current Fund balances as of December 31, 2011-2015 and the surplus included in the budget for each succeeding year are as follows:

Surplus

Current Fund Used in Succeeding Year Balance, December 31(1) Year Budget 2015* $29,554,236 - 2014 - - 2013 - - 2012 12,959,748 12,904,748 2011 17,872,230 17,825,000

*Unaudited

Deferred Charges

Under State law, emergency appropriations and cash deficits must be provided for in the subsequent year’s budget. Emergency appropriations, those made after the adoption of the budget and determination of the tax rate, may be authorized by the governing body of the municipality. However, with minor exceptions, such appropriations which are not funded in the current fiscal year must be included in full in the following year’s budget as deferred charges. When such appropriations exceed 3% of the adopted operating budget, consent of the Director of Local Government Services must be obtained before such appropriation can be made. In response to the ongoing recovery from Hurricane Sandy, the Local Finance Board issued Local Finance Board Notice 2012-22, which granted blanket approval of emergency resolutions that exceed the 3% expenditure limit. The exceptions are certain enumerated quasi-capital projects such as ice, snow, and flood damage to streets, roads, and bridges which may be financed over three (3) years, and tax map preparation, the costs related to the revision of ordinances, master plan preparations, revaluations and contractually required severance liabilities resulting from the layoff or retirement of employees which may be financed over five (5) years.

Special Emergencies, Emergency Appropriations and Cash Deficits Deferred to Subsequent Years 2011-2015

Deferred to Deferred to Year Following Year Subsequent Years 2015* $ 9,154,101 $45,127,330 2014 5,925,143 44,281,431 2013 - 40,321,209 2012 3,500,000 10,200,000 2011 2,200,000 7,200,000 *Unaudited A-35 In addition to emergency appropriations, there are other classes of expenditures which are treated in the same manner as emergency appropriations. This category consists almost entirely of over expenditures of appropriations and deficits from operations.

Water Utility Balances, Revenues and Expenditures

The City has, by provisions contained in duly adopted ordinances, covenanted with the holders of a portion of its Water System Improvement Bonds (see “Total Debt Service Schedule of City General Obligation Bonds” herein) that (1) the City shall fix and collect rates, rentals, or other charges for connection with use of, and for water furnished by, the water supply system established, maintained, and operated by the City, including any improvements thereto and extensions thereof hereafter constructed or acquired, and (2) such rates, rentals, and other charges shall be sufficient to produce in each fiscal year of the City the revenues necessary to provide for the payment of (a) all expenses of operation, maintenance, and repair of such water supply system, incurred or payable during such fiscal year, and (b) 110% of all principal and interest payable during such fiscal year with respect to all of such bonds and also all other bonds heretofore issued to finance such water supply system, and (3) if a deficiency with respect to the covenants nevertheless results, the City shall forthwith revise its rates as necessary to make up such deficiency.

The City has further covenanted that it shall establish a “Maintenance Reserve and Replacement Fund” for repair and improvements of the Water Supply System. No money shall be transferred from the water supply system’s accounts to any other City account unless all operations, maintenance, and debt service have been provided for and there remains in the Maintenance Reserve and Replacement Fund the lesser of $10 million or 50% of the system’s most recent annual operations budget. Nothing in the covenants, however, prohibits the use of money from the Maintenance Reserve and Replacement Fund for the payment of debt service or the expenses of operation and maintenance of the water supply system.

The City’s Water Utility Fund is used to account for the receipts and expenditures arising from operations of the water utility and the assets and liabilities relative to these activities. The balance in the Water Utility Fund as of December 31 of each year is comprised of cash, investments, and certain receivables. Under State law, only the amount of Water Utility Fund balance held in cash or quick assets may be included as anticipated surplus in the succeeding fiscal year’s Water Utility budget, unless the Director of the Division of Local Government Services gives written consent to an exception.

The Water Utility Fund balances as of December 31, 2011-2015 and the surplus included in the budget for each succeeding year are shown below:

Surplus

Water Fund Used in Succeeding Year Balance, December 31(1) Year Budget 2015* $11,157,121 - 2014 4,146,479 4,080,000 2013 854,282 854,000 2012 -0- -0- 2011 3,704,946 3,705,000

(1) In accordance with the accounting principles prescribed by the State of New Jersey, Department of Community Affairs, Division of Local Government Services, the City realizes revenue on a cash basis except as described in notes to the financial statements in Appendix B. Expenditures are accrued based upon the budget when it is adopted and any unexpended balances are credited to fund balance at the end of the year succeeding the budget period. See Note 1 to the annual financial statements in Appendix B for a further discussion of the City’s method of accounting. *Unaudited A-36 The following schedules of the Water Utility Fund operations for the years ended the years ended December 31, 2011-2015 have been prepared by the City in conformity with accounting principles and practices prescribed by the Division of Local Government Services in the Department of Community Affairs, State of New Jersey, which principles and practices differ in certain respects and which in some instances may differ materially, from generally accepted accounting principles applicable to local government units. The following schedules should be read in conjunction with the financial statements and related notes.

SCHEDULE OF REVENUES WATER UTILITY FUND

2015* 2014 2013 2012 2011 Surplus $4,080,000 $854,000 $0 $ 3,704,946 $3,705,000 Water Rents 52,430,374 46,335,211 45,890,706 48,022,818 47,757,169 Lien Sale Proceeds - - - - 93,186 Deficit – General Budget - - - 788,494 - Other Credits to Income: Non-Budgeted Revenue 140,794 1,053,701 740,939 - 13,005 Unexpended Balance of Appropriate Reserves 2,996,259 1,026,951 3,328,074 150,881 3,929,299 Accounts Payable Cancelled - 1,006,323 - 1,401,000 - Grants - - - 164,000 - Miscellaneous - 9,818 67,909 4,178 - $59,647,427 $50,286,004 $50,027,628 $54,236,317 $55,497,659

2015* 2014 2013 2012 2011 Operating $39,027,366 $39,140,613 $37,289,694 $42,790,649 $39,945,198 Debt Service 4,459,561 4,670,607 4,934,449 5,036,054 4,634,399

Deferred Charge and Statutory Expenditures 956,887 1,099,134 1,093,331 1,070,000 825,357

Capital Improvements/Incl. Equipment Lease 4,098,628 2,967,316 3,814,512 5,323,684 4,085,000 $48,542,442 $47,877,670 $47,131,986 $54,220,707 $49,489,954

Reserve for Protested

Checks - - - 8,519 - Prior Years Refunds – Voucher - 120,466 75,815 7,091 - Miscellaneous – Budget Operations 14,343 107,577 -- 3,416 $48,556,785 $48,105,713 $49,106,766 $54,236,317 $49,493,370 *Unaudited A-37

Statutory Excess in Revenue $11,090,642 $2,180,291 $2,820,188 $0 $6,004,289 Fund Balance January 1 4,146,479 2,820,188 - 3,704,496 1,405,657 $15,237,121 5,000,479 854,282 3,704,496 7,409,946 Decreased by:

Utilized by Water Operating Budget 4,080,000 854,000 - 3,704,496 3,705,000 Balance December 31 $11,157,121 $4,146,479 $2,820,188 $-0- $3,704,946

*Unaudited

The City currently intends to embark upon a ten-year capital improvement program for its water system, to be funded principally from bonds to be issued by the City under the annual NJEIT financing program. The City currently estimates that up to $225 million in capital improvements for the water system will be undertaken in the next 10 years, subject to sufficient increases in the user rates and various regulatory approvals. Such improvements would be in addition to any capital requirements relating to the City participation in the water supply and transmission systems of the North Jersey District Water Supply Commission.

The City closed a $12.65 million Construction Financing Program Loan with NJEIT on June 27, 2016. Proceeds will be used to fund water main rehabilitation projects within the City.

Sewer Utility Balances, Revenues and Expenditures

The Sewer Utility Fund was established on August 31, 1994. It is used to account for the receipts and expenditures arising from the operations of the sewer utility and the assets and liabilities pertaining to these activities. Prior to 1994, these receipts and expenditures were accounted for in the City’s Current Fund. The balance in the Sewer Utility Fund as of December 31 of each year is comprised of cash, investments, and certain receivables. Under State law, only the amount of the Sewer Utility Fund balance held in cash or quick assets may be included as anticipated surplus in the succeeding fiscal year’s Sewer Utility budget, unless the Director of the Division of Local Government Services gives written consent to an exception.

The Sewer Utility Fund balances as of December 31, 2011-2015 and the surplus included in the budget for each succeeding year are shown below:

Surplus

Sewer Utility Fund Used in Succeeding Year Balance, December 31(1) Year Budget 2015* $6,232,476 $ - 2014 - - 2013 10,705 77,200 2012 277,151 277,150 2011 1,782,541 1,780,000

The following schedules of Sewer Utility Fund operations for the years ended December 31, 2011-2015 have been prepared by the City in conformity with accounting principles and practices prescribed by the Division of Local Government Services in the Department of Community Affairs, State of New Jersey, which principles and practices differ in certain respects and which in some instances may differ materially, from generally accepted accounting principles applicable to local government units. The following schedules should be read in conjunction with the financial statements and related notes.

SCHEDULE OF REVENUES SEWER UTILITY FUND

2015* 2014 2013 2012 2011 Surplus $ - $10,705 $277,150 $1,780,000 $385,842 Sewer Rents 49,852,835 51,126,436 52,043,926 48,028,152 53,727,961 Budget Operations East Orange PVSC 2,707,606 2,422,878 2,445,681 2,540,657 Sale Proceeds - Liens 1,201,266 387,940 Non-Budgeted Revenue 316,654 108,840 52,471 45,032 45,772 Cancellation of Payroll Transfer - 2,497 - - - Grants Commitments Payable Cancelled - - - 601,418 - Deficit (General Budget) - 28,746 - ‐ - Unexpended Balance of Appropriation Reserves 2,688,852 1,230,664 849,107 382,695 1,098,691 Total Revenues $55,565,947 $52,505,391 $55,645,532 $54,484,244 $58,186,863

2015* 2014 2013 2012 2011 Operating $41,744,122 $46,930,980 $47,877,507 $43,951,031 $49,983,073 Capital Improvements 750,000 500,000 550,000 1,334,500 1,050,000 Debt Service 6,417,936 6,105,966 6,584,741 6,083,803 5,628,799

Deferred Charge and Statutory

Expenditures 421,413 560,721 556,000 506,000 556,000 Total Expenditures $49,333,471 $54,100,170 $55,568,248 $51,875,334 $57,217,871

Payroll Transfer Cancelled 2,497

Deficit in Operations $1,594,779

Statutory Excess to Operating Fund Balance 6,232,476 - 77,284 2,608,910 968,992

A-39

Fund Balance January 1 - $10,705 $277,151 $1,782,541 $2,168,383 Decreased by: Appropriated in Municipal Budget ‐‐ ‐2,334,300 -

Utilized by Sewer Operating Budget 10,705 277,151 1,780,000 385,842 Balance December 31 $6,232,476 $- $77,285 $277,151 $1,782,541

*Unaudited

The City currently intends to embark upon a ten-year capital improvement program for its sewer system, to be funded principally from bonds to be issued by the City under the annual NJEIT financing program. The City currently estimates that up to $235 million in capital improvements for the sewer system will be undertaken in the next ten years, subject to sufficient increases in the user rates and various regulatory approvals. Such improvements would be in addition to any capital requirements relating to the City participation in the sewage treatment and disposal systems of the Joint Meeting of Essex and Union Counties and the Passaic Valley Sewerage Commission.

On May 21, 2001, the City entered into an Administrative Consent Order (the “ACO”) with the New Jersey Department of Environmental Protection (the “NJDEP”) relating to certain alleged violations by the City of the permits by which the City operates its combined sewer outfall system (the “CSO system”). Under the ACO, the City has committed to undertake various improvements to the CSO system and to achieve certain milestone dates in connection therewith, subject to permitted delays by reason of, among other things, force majeure. The City has failed to achieve a number of such milestone dates, and has obtained extensions from NJDEP based on force majeure. The current extension called for completion of the construction and commencement of operation of these CSO facilities at various dates from October 31, 2012 until December 31, 2014 dependent upon the Facility. The City intends to complete the required improvements to the CSO system, and has authorized and/or issued bonds in an amount it deems to be sufficient to do so. However, because of the delays experienced to date, and in view of the time needed to complete the required improvements, the City is at risk for payment of substantial penalties to the NJDEP under the ACO. While these fines could be substantial, up to $500 per day per facility not completed, it is currently believed that the requirements of the ACO will be satisfied if the needed properties are acquired from the private owners where the facilities must be constructed.

ASSESSMENT AND COLLECTION OF TAXES

Property Valuation and Tax Rates

The City derives its power to levy direct real and personal property taxes from Article VIII, Section I of the Constitution of the State. The City serves as the taxing district for the assessment and collection of the local property tax.

Real property must be assessed at the percentage of true value established by the Essex County Board of Taxation (the “Board”). The Board has established such percentage at 100% of real value, and has normally required revaluation by cities within the County when assessed valuations reach a level of 80% of true value. See “Revaluation” herein.

A-40 The County apportions its taxes among its constituent taxing districts according to its own calculation of equalized valuation. In turn, the State annually develops its own equalized valuation for each of its taxing districts, such State equalized valuation being used in the calculation and distribution of school Equalization Support as well as the valuation basis for purposes of computation of the City’s statutory borrowing capacity.

The only personal property subject to local assessment is the machinery, implements, and equipment of telephone companies. These companies annually submit a listing and valuation of all such equipment to the City Assessor. Through application of the State-supplied ratio, the City fixes the assessed valuation of such property.

The following table indicates municipal and County equalized valuations for recent years:

County Year Municipal(1) Equalized 2006 10,913,478,239 13,294,293,258 % 2007 11,001,867,400 16,479,325,288 % 2008 10,858,108,700 17,919,971,676 % 2009 11,001,329,400 19,450,553,513 % 2010 10,763,710,300 19,166,383,151 % 2011 10,768,452,500 17,120,880,697 % 2012 10,871,953,866 16,805,296,955 % ** 2013* 12,979,522,245 15,437,845,761 2014 12,435,612,711 14,055,479,957 2015 12,435,954,600 14,075,593,561 ______Source: City of Newark, Division of Assessments (1) Includes Personal Property *Revaluation

Property Tax Reform

In recent years, the New Jersey Legislature has considered various proposals to lessen the dependence of local governments on property taxes and to find alternative means to fund vital governmental services.

On July 13, 2010, the Governor approved legislation which, in addition to the “Cap Law” described under “THE CITY OF NEWARK – Limitation on Expenditures” above, amends the property tax levy cap that was enacted in 2007. This law puts a limitation of 2% on the property tax levy set in the annual budget. The law allows for exclusions for capital expenditure, debt service, increase in pension contributions and accrued liability for pension contributions in excess of 2% and increases in health care costs in excess of 2%. This limitation may be exceeded by approval of an affirmative vote in excess of 50% of the people voting at a special referendum held for such purpose.

Any legislation or constitutional amendments which alter the existing system of real property taxation in New Jersey may adversely affect the security and/or market value of bonds, notes and other obligations of counties and municipalities (such as the City).

Property Classification and Valuation

The following table indicates assessed valuation by property classification and number of assessments since 2011:

A-41

Real Vacant Real Real Real Real Total Year Personal Land Residential Commercial Industrial Apartment Valuation 2011 No of Assessments 1 4,151 29,807 5,314 908 1,245 41,426 Municipal Valuation 71,477,209 417,669,600 5,430,378,500 3,309,787,300 884,892,400 725,724,700 10,768,452,500 2012 No. of Assessments 1 4,112 29,883 5,291 903 1,251 41,440 Municipal Valuation 72,125,700 414,280,900 5,604,504,000 3,275,435,766 872,839,600 732,767,900 10,871,953,866 2013* No. of Assessments 1 4,311 29,532 5,118 1,096 1,242 41,281 Municipal Valuation 83,692,945 511,003,000 5,081,645,900 4,669,282,700 1,367,845,500 1,256,046,200 12,979,522,245 2014 No. of Assessments 1 4,338 29,518 5,066 1,085 1,238 41,246 Municipal Valuation 71,521,800 502,622,411 5,107,658,300 4,277,947,100 1,270,718,800 1,185,139,760 12,435,612,111 2015 No. of Assessments 1 4,306 29,555 5,023 1,081 1,239 41,205 Municipal Valuation 77,950,600 483,146,400 5,149,943,700 4,211,460,500 1,278,315,500 1,145,137,900 12,,345,954,600 ______Source: City of Newark, Division of Assessments *Revaluation

Tax-Exempt Properties

The previous chart only includes the taxable assessed valuations within the City. Tax-exempt property includes that owned by the Port Authority of New York and New Jersey, which comprises more than 20.5% of the total land area of the City. It also includes property of the Newark Housing Authority, as well as County buildings and parks. Other categories of tax-exempt property include State property, public schools, Federal property, charitable and church property, hospitals, municipal property, and higher education institutions.

The City derives revenue from many of these “tax-exempt” properties. The State makes in lieu of tax payments for State owned property in an amount equal to the equalized Municipal Tax Rate times the assessed value of the property. The Port Authority makes a payment to the City under a long-term lease agreement for Newark Liberty International Airport and Port Newark. The City also realizes significant monies from Fox-Lance and Limited Dividend properties, which have property taxes abated according to a statutory formula. In addition, tax abatement and exemptions for up to five (5) years can be made available for industrial, commercial, and residential rehabilitation and new construction projects.

Therefore, City officials believe that analytical ratios based upon traditional measurements of property value, either assessed or full, fail to portray the true nature of urban redevelopment in Newark. Whether they are intended to measure the City’s economic or financial base, they do not reflect the extent of development in the City where older properties leave the assessment rolls and are replaced by new developments which provide revenues and economic activity but which frequently do not enter the traditional tax base because they are built under alternative tax formulas.

The following table compares taxable municipal valuation with the valuation of all tax-exempt property, including Port Authority, County, State, school, municipal, and charitable holdings as well as tax-abated development properties.

A-42 Assessed and Tax-Exempt Valuation

Taxable Municipal Year Valuation Tax-Exempt Valuation 2015 $12,345,954,600 $11,181,566,900 2014 12,435,612,111 11,023,124,300 2013* 12,979,522,245 10,961,729,900 2012 10,871,953,866 7,724,862,399 2011 10,768,452,500 7,708,351,399 2010 10,763,710,300 7,783,769,799

Source: City of Newark, Division of Assessments *Revaluation

Tax Appeals

Taxpayers may appeal assessments to the Board prior to April 1 of the tax year. The Board sits as an appeals body to consider such claims. The Board’s decision may be appealed to the State Tax Court. Certain appeals are made directly to the State Tax Court. Successful appeals often result in a payment due from the City to the taxpayer for prior overpayments (while the appeal was pending).

Revaluation

In 2013, the City revaluation was completed by Appraisal Systems, Inc. The new valuations appeared on the 2013 Tax List.

Tax Levy

The amount to be raised by taxation includes the City’s share of the County tax, apportioned by the Board among its taxing districts, and the amounts to be raised for school and municipal purposes as set forth in the City budget. The amount required to be collected is the amount to provide the sums needed to balance the municipal and school budgets and the City’s share of the amount needed to balance the County’s budget after other revenue sources have been taken into account. State law requires that the amount of the levy be equal to amounts necessary to balance the respective budgets with certain adjustments plus an additional amount as a reserve for uncollected taxes based on the preceding year’s collection experience. The City must pay its share of the County budget levy on the 15th of each month in which quarterly tax payments are due. School district taxes are paid by a 20% initial payment and thereafter as requested by the custodian of school funds.

The burden of a shortfall in tax collections exceeding the reserve for uncollected taxes must be assumed by the municipal portion of the City budget. See “CITY FINANCIAL PROCEDURES - The Municipal Budget Process”. The City is authorized to borrow for the purpose of making required payments to the County and City School district.

The following table presents the property tax levies for fiscal years 2011-2015. Certain deductions are given to veterans and senior citizens. These adjustments are made pursuant to the Constitution of the State, which provides for annual reductions of property taxes of veterans or their widows and qualifying senior citizens. The State provides 100% for these deductions.

A-43 Analysis of Tax Levy

2011 2012 2013 2014 2015 Municipal $ 158,693,970 $ 169,514,926 $ 178,055,013 $184,583,686 $201,929,223 Municipal Open Space 1,234,596 School 112,010,666 113,432,419 114,542,284 116,486,882 118,688,979 County 74,477,510 77,116,429 74,907,035 67,813,075 70,376,489 Total Amount Required to Balance $ 345,182,146 $ 360,063,774 $ 367,504,332 $368,883,643 $392,229,287 Reserve for Uncollected 15,527,000 15,150,000 15,656,000 16,650,211 16,201,150 Total Required General Tax Levy $ 360,709,146 $ 375,213,774 $ 383,160,332 $385,533,854 $408,430,437 Less: Veteran’s and Senior Citizens 365,750 339,250 319,250 306,500 280,750 Required Property Tax Levy Billed $ 360,343,396 $ 374,874,524 $ 382,841,082 $385,26,354 $408,149,687

City Special Taxes

The total value of all revenue collected from special taxes in 2015 was $77,656,526 ($48,768,086 from payroll taxes, $22,454,387 from parking taxes, and $6,434,053 from hotel taxes), an increase of approximately $9 million from the amounts anticipated in the City’s 2015 budget. These taxes are imposed and collected by the City under authority granted by the State Legislature.

The enacted 2007 New Jersey State bill S2891 increased the parking tax from 15% to 22% for special events and therefore increased the annual revenue collected from the parking tax. The economic activity generated by the Prudential Center and other local attractions increased the number of vehicles utilizing local paid parking facilities for special events.

The City’s authority to impose special taxes has been renewed by the Legislature several times in the past upon its expiration. On December 22, 2004, the Governor signed a bill that eliminated the sunset provision (expiration date) in the City’s authorization to impose and collect parking and payroll taxes.

Beginning in 2016, the State Division of Taxation has agreed to share its employer database with the City with respect to employers located in the City. The City is in the process of cross-referencing its database with such State-provided information to ensure that businesses located in the City that are required to pay the City’s payroll tax are paying the amount required.

Collections

For collection comparison purposes, several adjustments are made to the amount of the current levy to reflect adjustment due to rounding of the tax rate and to additional assessments.

A-44 CURRENT GENERAL TAX LEVY

2011 2012 2013 2014 2015* Municipal $158,693,970 $169,514,926 $178,055,013 $184,583,686 $201,929,223 Municipal Open Space 1,234,596 School 112,010,666 113,432,419 114,542,284 116,486,882 118,688,979 County 74,477,510 77,116,429 74,907,035 67,813,075 70,376,489 Reserve for Uncollected Taxes 15,527,000 15,150,000 15,656,000 16,650,211 16,201,150 Total $360,709,146 $375,213,774 $383,160,332 $385,533,854 $408,430,437 TOTAL CURRENT COLLECTIONS $348,166,902 $364,231,292 $348,817,915 $376,813,048 $400,276,147 Percent Collected of Current Levy 96.52% 97.07% 91.04% 97.73% 98.0% Percent Collected of Current Levy Minus Reserve for Uncollected Taxes 100.86% 101.16% 94.66% 102.15% 102.05%

*Unaudited

Delinquent Taxes and Tax Title Liens

The local property tax is due in quarterly installments on February 1, May 1, August 1, and November 1. The first two (2) installments are billed and collected at the previous year’s rate and valuation with necessary adjustments made in the final installments.

Delinquent taxes are enforced and collected by the City through the sale of the tax liens against the property. Tax Certificates are offered at the maximum rate of interest (18%) for holding the lien during the redemption period. If the lien is not purchased, it is acquired by the City. The redemption period is the time during which the property owner may pay the taxes, penalties, and costs required to remove the lien. This is a two (2) year period for privately-held liens and six (6) months for municipally held liens. At the expiration of the redemption period, the lien holder may move to acquire a tax deed for the property. When the lien is held by the City, it may move to foreclose, In Rem, at the end of six (6) months from the time the City became lien holder.

2011 2012 2013 2014 2015* Delinquent Tax Collected $24,979,913 $ 252,551 $ 3,077,959 $13,424,931 $990,625 Delinquent Tax Balance December 31 3,412,750 487,145 22,454,342 2,506,590 4,759,691 Tax Title Liens Collected 6,326,779 12,711,537 6,088,151 7,448,893 9,351,077 Tax Title Liens Balance December 31 38,862,258 27,954,820 29,045,984 37,188,531 36,331,139 Foreclosed Prop. Balance December 31 81,491,738 131,224,638 131,612,758 131,612,758 132,103,680

*Unaudited CITY EMPLOYEES

Under the laws of the State, municipal employees have certain organizational and representational rights, which include the right to organize, to bargain collectively by representatives of A-45 their choosing, and to engage in lawful concerted activities for bargaining. The law prohibits strikes by municipal employees.

Approximately 3,000 regular employees of the City are covered by collective bargaining agreements, which have been negotiated with twenty different collective bargaining units. The right of most public employees to organize for collective bargaining is guaranteed by New Jersey law.

A general distinction is made between uniformed employees and non-uniformed employees. The uniformed employees – police and fire – are organized into four (4) major bargaining units: Police, Police Superior Officers, Firemen, and Fire Officers, although some superior officers bargain in a much smaller unit. While the New Jersey Constitution prohibits strikes by all public employees, the Legislature has given uniformed employees the right to interest arbitration, which is a binding process resulting in a settled agreement. No other bargaining units have the right to binding interest arbitration. Interest arbitrators are appointed by the New Jersey Public Employment Relations Commission.

The City has been proactive in its approach to resolve all open contracts, stabilize the negotiating process, pursue voluntary, rather than arbitrated settlements, and bring consistency to the many terms of employment. Two (2) major focuses of the City’s negotiations are a reduction in soaring health insurance costs and operational changes to reduce overtime.

Successor agreements with all uniform unions were reached and have been formally adopted by Council. Negotiations with all uniformed personnel provided for an average annual increase of 2.625% over four years (all contracts are for the term: January 1, 2009 - December 31, 2012 and the increases are as follows: ’09 – 2.25%, ’10 – 2.50%, ’11 – 2.75% and ’12 – 3.00%). All parties recognized the national financial crisis and the need for all employees to assist the City in cost saving measures. This concession is extremely significant since arbitration would have reduced saving to the City dramatically. In addition, the City implemented caps in the manner that compensatory time is banked and paid out. Specifically, effective January 1, 2010, any compensatory time earned or accrued must be paid or utilized within the 24 month period in which it was accrued. Payouts would be at the current rate of pay as opposed to the previous practice of paying it all out on a lump sum basis at the time of separation (or a higher rate of pay). In each case, the goal of achieving out-of-pocket savings, where possible, and operational changes, to reduce overtime and compensatory time remain consistent. The City has begun preliminary negotiations with uniform unions over new successor agreements.

The City already has contracts in place with the vast majority of its non-uniformed personnel, and three (3) of those units are engaged in negotiations for successor contracts. The approach taken with both uniformed and non-uniformed employee groups, however, as well as the City’s goals, are the same.

Recognizing the significant role that personnel costs play in the City’s budget, the negotiation of mutually acceptable collective bargaining agreements is a major priority.

The City is in compliance with Chapter 78, P.L. 2011, which provided for changes to the manner in which the State-administered retirement systems operate and to the benefit provisions of those systems. The law also changes the manner in which the State-administered Health Benefits Programs operate and the employee contribution and benefit provisions of those programs. The City expects to collect approximately $13 million in employee contributions to health benefit costs in 2016.

INSURANCE

Since 1996, the City has purchased property insurance, which protects the City from loss to properties by fire and other perils in excess of $100,000 with a total insurance coverage of $299,060,229.

A-46 The City also purchases insurance coverage for Pollution Liability for its water treatment facility, a Blanket Public Employee’s Dishonesty Bond and Statutory Public Officials Bonds.

Responsibility for insurance and risk management including purchase of insurance and maintenance of insurance trust funds (including Worker’s Compensation) lies with the Insurance Fund Commission, a statutory commission consisting of three commissioners appointed by the Mayor and Council. The City Business Administrator is currently Chairman of the Insurance Fund Commission with the Director of Finance and the Corporation Counsel serving as the other two (2) members. The Commission’s efforts are supported by the City’s Risk Manager, a role created in 2007 to augment the City’s insurance and risk management efforts.

The Worker’s Compensation Trust Fund is administered by the City Law Department. Worker’s Compensation Claims are handled by the City Law Department who coordinates the administration process with the Insurance Fund Commission and a Third Party Administrator. Tort claims are handled in house by the Law Department. Claims for property losses are handled directly by the Insurance Fund Commission and the City’s Risk Manager. Claims are paid by the City Treasurer after approval by Mayor and Council and/or the Law Department, City Comptroller, or Insurance Fund Commission.

In 1977, the City established a comprehensive Self-Insurance and Risk Management Program including the creation of separate dedicated trust funds for each of the City’s insurance needs. Year-end balances for the past five (5) years were as follows:

2011 2012 2013 2014 2015* Worker’s Comp $178,868 $646,366 $1,614,154 $2,743,945 $3,330,624 Liability 2,390,526 6,454,814 8,540,698 9,212,147 5,792,444 State Unemployment 289,713 1,011,676 2,792,298 2,673,193 2,255,851 TOTAL $2,859,107 $8,112,856 $13,937,150 $14,629,285 $11,378,919

*Unaudited PENSION SYSTEMS

City employees who are eligible for pension coverage are enrolled, depending on their employment status, in one of four pension systems. All four (4) pension systems were established by acts of the State Legislature. Benefits, contributions, means of funding, and the manner of administration are determined by State legislation. Three (3) of the pension systems are directly administered by the State; the fourth system is administered by the City. City public school teachers are enrolled in the State Teachers Pension and Annuity Fund. The City’s pays its State-assessed annual pension contribution to the State in full each year. Such payment was approximately $55 million for the City’s 2016 fiscal year.

State Administered Pension Funds

Three (3) primary State Administered pension funds include the Consolidated Police and Firemen’s Pension Fund, the Police and Firemen’s Retirement System, and the Public Employees’ Retirement System. The Division of Pensions within the Treasury Department of the State is the administrator of the funds with benefit and contribution levels set by the State.

Consolidated Police and Firemen’s Pension Fund

The Consolidated Police and Firemen’s Pension Fund is a closed system with no active members and was established in January 1952 to provide coverage to municipal police and firemen who were appointed prior to July 1, 1944.

A-47 Police and Firemen’s Retirement System

All uniformed employees of the City who began employment after 1944 are enrolled in this system. At the present time the State’s requirement for municipal contribution is equal to 8.5% of gross employee salaries. Employee contributions depend on age at date of entry and range from 6.73% to 9.32% of salary. In addition, the City is required to pay its share of unfunded past service liability in order to amortize this liability over the next 35 years.

Public Employees’ Retirement System

The Public Employees’ Retirement System (“PERS”) includes all temporary non-uniformed employees and all non-uniformed permanent employees who because of physical condition are not eligible for the City’s Employee Retirement System. The system is evaluated every year and the required rate of contribution of participating municipalities is determined at that time. Contributions for normal service are generally set for municipalities at 150% of employee contribution. At the present time, such contributions approximate 5.0% of gross salaries. In addition, the City is required to pay its share of unfunded past service liability in order to amortize this liability over the next 35 years.

Defined Contribution Retirement Program

The Defined Contribution Retirement Program (“DCRP”) was established on July 1, 2007 for eligible public employees, with a minimum base salary of $1,500 or more, with a tax-sheltered, defined contribution retirement benefit, in addition to life insurance and disability coverage. With the DCRP the value of the pension is based on the amount of the contribution made by the employee and employer and through investment earnings. Contributions made by employees for DCRP are currently at 5.5% of gross wages. Member contributions are matched by a 3.0% employer contribution. The DCRP is jointly administered by the Division of Pensions and Benefits and Prudential Financial.

SOCIOECONOMIC AND DEMOGRAPHIC INFORMATION OF THE CITY

LARGEST TAXPAYERS

2015 Assessed Valuation

Prudential Insurance Co. of America $201,260,000 NJBT Co, c/o Duff & Phelps, Tax Admin 147,935,587 Anheuser Busch, Inc. (Corp Tax Dept) 125,000,000 Three Penn Plaza Prop. (Horizon) 114,750,000 Prudential Newark Realty, LLC 108,535,600 2 Gateway Center Partners, LLC 95,000,000 Wells Reit II 80 Park Plz, LLC 90,000,000 Newark Legal Port Author (c/o B. Myones) 62,833,400 ONC Tower Urban Renewal, LLC 62,284,800 3 Gateway Center Prop 62,250,000 ______Source: City of Newark Tax Assessor

A-48 POPULATION

Year City County State 1960 405,220 923,545 6,066,782 1970 381,930 929,986 7,192,805 1980 329,248 851,116 7,364,823 1990 275,221 778,206 7,730,188 2000 261,620 793,633 8,414,350 2010 277,140 783,969 8,791,894 ______Source: US Department of Commerce, Bureau of the Census, General Social and Economic Characteristics

LABOR FORCE - CITY OF NEWARK

Unemployment Rate Labor Force Employed Percent Year (000) (000) Employed City County State 2011 107.9 91.5 84.8 15.2 9.3 9.3 2012 108.6 92.7 85.4 14.5 10.3 9.6 2013 109.3 93.0 85.1 14.2 10.1 8.5 2014 118.9 106.6 89.6 10.4 8.0 6.7 2015 118.4 108.0 91.2 8.8 6.7 5.6 ______Source: New Jersey Department of Labor and Workforce Development

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APPENDIX B CITY OF NEWARK AUDITOR’S REPORT AND FINANCIAL STATEMENTS

[ THIS PAGE INTENTIONALLY LEFT BLANK ] SAMUEL KLEIN AND COMPANY CERTIFIED PUBLIC ACCOUNTANTS

550 Broad Street 36 West Main Street, Suite 301 Newark, New Jersey 07102-4517 Freehold, New Jersey 07728-2291 Phone (973) 624-6100 Phone (732) 780-2600 Fax (973) 624-6101 Fax (732) 780-1030

INDEPENDENT AUDITOR'S REPORT

To the Mayor and Members of the City Council City of Newark Newark, New Jersey 07102

The accompanying summary financial statements - regulatory basis, and the related notes, are derived from the audited basic financial statements of the City of Newark, State of New Jersey, as of and for the years ended December 31, 2014, 2013, 2012 and 2011. We expressed unmodified audit opinions on those audited financial statements - regulatory basis in our report dated June 26, 2015. The audited financial statements - regulatory basis, and the summary financial statements - regulatory basis derived therefrom, do not reflect the effects of events, if any, that occurred subsequent to the date of our report on the audited financial statements - regulatory basis.

The summary financial statements - regulatory basis do not contain all the disclosures required by Generally Accepted Accounting Principles of the City of Newark, State of New Jersey. Reading the summary financial statements - regulatory basis, therefore is not a substitute for reading the audited financial statements - regulatory basis of the City of Newark, State of New Jersey.

Management’s Responsibility for the Summary Financial Statements

Management is responsible for the preparation of the summary financial statements - regulatory basis on the basis described in Note 1.

Auditor’s Responsibility

Our responsibility is to express an opinion about whether the summary financial statements - regulatory basis are consistent, in all material respects, with the audited financial statements - regulatory basis based on our procedures, which were conducted in accordance with auditing standards generally accepted in the United States of America. The procedures consisted principally of comparing the summary financial statements - regulatory basis with the related information in the audited financial statements - regulatory basis from which the summary financial statements - regulatory basis have been derived, and evaluating whether the summary financial statements - regulatory basis are prepared in accordance with the basis described in Note 1. We did not perform any audit procedures regarding the audited financial statements - regulatory basis after the date of our report on those financial statements.

B-1 Members American Institute of Certified Public Accountants www.samuelklein-cpa-rma.com

Opinion

In our opinion, the summary financial statements - regulatory basis of the City of Newark, State of New Jersey as of and for the years then ended December 31, 2014, 2013, 2012 and 2011 referred to above are consistent, in all material respects, with the audited financial statements - regulatory basis from which they have been derived, on the basis described in Note 1.

Emphasis-of-Matter

These summary financial statements - regulatory basis were prepared for the purpose of inclusion in an official statement for the issuance of General Obligation Open Space Bonds, Series 2016 (Riverfront Park) of the City of Newark, State of New Jersey and were abstracted from audit reports issued under the periods referred to above as dated June 26, 2015, January 8, 2015, March 27, 2014 and January 18, 2013, respectively.

JOSEPH J. FACCONE, RMA, PA

Newark, New Jersey June 26, 2015

B-2 CITY OF NEWARK

CURRENT FUND - COMPARATIVE BALANCE SHEET - REGULATORY BASIS Sheet #1

Unaudited Audited Balance Balance Balance Balance Balance ASSETS AND DEFERRED CHARGES Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Regular Fund Cash $ 133,463,126 $ 60,585,295 $ 55,514,885 $ 128,456,977 $ 52,446,038 Cash - Deposit with State 9,050,585 9,223,480 9,786,238 10,214,649 9,605,597 Sub-Total 142,513,711 69,808,775 65,301,123 138,671,626 62,051,635 Cash - Change Fund 2,440 2,440 2,440 2,440 142,513,711 69,811,215 65,303,563 138,674,066 62,054,075

Delinquent Property Taxes Receivable 4,759,691 2,506,590 22,453,733 1,799,005 3,412,750 Tax Title Liens Receivable 36,331,139 37,188,531 29,045,984 27,954,820 38,862,258 Protested Checks 2,313,864 3,609,540 2,628,278 1,817,517 1,772,309 Revenue Accounts Receivable 1,653,636 2,089,714 1,661,364 1,280,918 Deposits with County Registrar 2,231 2,231 2,231 2,231 2,231 Property Acquired for Taxes: Assessed Valuations 132,103,680 131,612,758 131,612,758 131,224,638 81,491,738 Sales Contracts Receivable 12,554,478 12,554,478 12,554,478 12,544,478 12,544,477 Petty Cash Fund 2,351 3,052 2,800 1,700 Tax Abatements Receivable 7,767,130 157,640 2,295,793 1,228,400 1,875,290 Interfunds Receivable 5,978,446 18,716,526 180,802 4,671 5,230,748 Due from Housing for Senior Citizens 14,906 14,906 14,906 14,906 14,906 Due from East Orange - Passaic Valley 90,118 90,118 90,118 63,392 Due from Payroll Transfer Account 267,888 238,973 203,571,670 208,546,084 201,149,769 178,556,096 146,487,625

Deferred Charges: Emergency Authorizations 54,281,431 56,906,574 40,321,209 13,700,000 9,400,000

400,366,812 335,263,873 306,774,541 330,930,162 217,941,700

State and Federal Grants Cash 6,779,775 26,239,483 24,031,601 27,848,376 32,272,995 State and Federal Grants Receivable 115,552,284 145,400,760 153,185,260 155,174,063 237,077,587 Prepaid Grant Expenditures 202,345 314,342 355,266 1,368,961 898,560 Accounts Receivable 47,875 47,875 47,875 47,875 47,875 SLEPA Receivable - Due from State of N.J. 103 103 103 103 103 Interfunds Receivable 3,251,387 121,469 482 60,462 48,248 Payroll Transfer Account 515,274 587,260 587,260 Unallocated Receipts 47,734 238,856 125,881,503 172,362,888 178,135,861 185,087,100 270,932,628

$ 526,248,315 $ 507,626,761 $ 484,910,402 $ 516,017,262 $ 488,874,328

B-3 CITY OF NEWARK

CURRENT FUND - COMPARATIVE BALANCE SHEET - REGULATORY BASIS Sheet #2

Unaudited Audited Balance Balance Balance Balance Balance LIABILITIES AND FUND BALANCE Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Regular Fund Appropriation Reserves, Commitments and Encumbrances $ 41,971,466 $ 33,372,283 $ 35,485,386 $ 31,538,200 $ 31,115,705 Commitments Payable 3,943,839 838,121 513,985 133,331 547,670 Due to N.J. - Senior Citizens 199,175 189,591 152,535 128,225 50,351 Reserve for Void Checks Pending Distribution 84,630 84,630 84,630 70,430 66,430 Unallocated Receipts/Tax Overpayments 2,737,709 Prepaid Taxes 2,469,227 1,651,446 1,839,390 39,343,676 1,382,233 Prepaid Tax Abatements 221,155 90,515 106,667 1,248,398 204,576 Due to Special Improvement District 360,928 1,432,540 812,497 55,445 509,704 Reserve for Judgments 1,954 1,954 1,954 1,954 19,948 Prepaid Special Improvement District Taxes 35,061 48,774 57,897 76,193 34,130 Due to Employee 86,228 86,228 86,228 Due to State of N.J. and Public Assistance Trust Fund 141,925 219,797 212,487 196,428 202,841 Due to State of New Jersey - Revaluation Expense 2,346,000 Interfunds Payable 34,623,894 14,182,405 808,377 1,554,701 122,821 Accrued Payroll County Taxes Payable 541,190 521,701 1,892,154 124,392 1,110,549 Reserve for Tax Appeals Pending 1,657,571 3,986,426 3,099,460 Due to Redflex Traffic Systems 1,802 199,410 248,948 695,436 204,374 Due to Parking Authority for Municipal Court Fees 207,247 191,940 149,979 164,667 386,774 Due to State of New Jersey - Uniform Construction 365,847 328,497 571,799 313,401 242,366 Accounts Payable - State Aid Credits 720,974 720,974 Due to N.J. Marriage and Civil Union Fees 96,876 Reserve for Open Space 1,147,454 Reserve for Election Poll Workers 1,627 1,627 Tax Overpayments 1,599,944 677,221 588,706 1,165,131 1,261,028 Reserve for Hurricane Sandy 562 143,562 1,736,121 5,922,182 Vouchers Payable 25,000 25,000 25,000 25,000 25,000 Reserve to Pay Emergency Note 25,000 25,000 25,000 25,000 Police Overtime Reimbursement 227,067 217,722 185,375 49,302 Tax Anticipation Notes Payable 69,834,000 64,973,000 49,950,000 40,000,000 Reserve for Master Plan 231,782 232,079 275,657 413,532 1,201,657 163,474,906 120,369,789 95,810,772 127,317,678 44,219,845 Emergency Note Revaluation 1,600,000 2,400,000 Emergency Notes Payable 3,766,000 6,348,000 9,814,000 12,045,000 6,962,000 Reserve for Other Receivables 203,571,670 208,546,084 201,149,769 178,556,096 146,487,625 Fund Balance 29,554,236 11,411,388 17,872,230 400,366,812 335,263,873 306,774,541 330,930,162 217,941,700

Federal and State Grant Funds Expenditure Reserves: SLEPA Administration Grant 227,444 227,444 227,444 227,444 227,444 Grants Appropriated 119,694,554 151,902,692 166,113,698 171,796,140 231,028,883 Reserve for Elderly Nutrition 2,343,839 2,340,572 2,350,788 2,398,900 2,407,719 Reserve for Safe Housing 1,290,446 579,833 1,579,833 1,579,833 1,579,833 Interfunds Payable 67,683 13,094,867 376,831 58,877 61,030 UEZ Loan Repayment 989,906 832,964 490,202 318,551 135,534 Due to Federal Government 724,718 724,718 724,718 724,718 724,718 Unappropriated Grants 542,913 2,659,798 5,989,941 7,708,288 34,501,458 Unallocated Receipts 282,406 274,349 266,009 125,881,503 172,362,888 178,135,861 185,087,100 270,932,628

$ 526,248,315 $ 507,626,761 $ 484,910,402 $ 516,017,262 $ 488,874,328

______

See accompanying notes to financial statements.

B-4 CITY OF NEWARK

CURRENT FUND - COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS

Unaudited Audited 2015 2014 2013 2012 2011 Revenue and Other Income Surplus Revenue (Fund Balance) $ $ $ 11,411,388 $ 17,825,000 $ 25,750,000 Miscellaneous Revenue Anticipated 442,306,034 390,551,863 413,041,814 382,314,385 406,899,010 Receipts from Delinquent Taxes 10,585,258 20,873,024 9,166,110 15,183,933 31,307,125 Receipts from Current Taxes 400,276,147 376,813,048 348,817,915 363,216,910 348,166,901 Nonbudget Revenue 1,762,348 1,732,082 2,236,479 3,718,730 1,254,312 Other Credits to Income: Appropriation Reserves and Accounts Payable Cancelled 3,458,738 521,321 3,857,622 1,640,439 564,919 Commitments Payable Cancelled 1,700,000 4,310,728 Tax Overpayments Cancelled 1,322,814 1,856,137 1,913,462 3,229,131 Interfunds Receivable Liquidated 4,771,309 680,232 Interfunds Payable Stale Dated Balance Sheet Items 335,104 Interfunds Payable Adjustments 1,689,828 Reserve for Petty Cash Realized 1,200 Reserve for Protested Checks Realized 14,995 Excess in Payroll Deduction Fund 607,881 Excess Animal Control Fund 4,691 Miscellaneous 4,387 199,625 416,737 Due from Payroll Transfer Account 267,888 864,487,035 794,640,295 790,444,790 789,708,385 819,298,499 Expenditures Budget and Emergency Appropriations: Operations: Salaries and Wages 254,683,382 246,576,864 244,699,294 247,040,797 244,460,564 Other Expenses 266,463,662 237,502,206 263,469,903 231,226,386 254,441,914 Capital Improvements 100,000 100,000 100,000 150,000 100,000 Municipal Debt Service 43,217,389 47,781,815 40,428,150 30,922,245 35,111,733 Local District School Debt Service 10,654,818 11,631,618 14,179,455 14,890,602 Deferred Charges and Statutory Expenditures - Municipal 71,620,558 68,329,536 68,396,406 70,217,891 70,789,155 Judgments 201,632 450,000 450,000 449,551 Deficit in Water Utility Fund 788,618 Unidentified Expenditures (1,860,000) Local District School Tax 113,404,558 111,170,927 108,957,124 106,768,670 104,378,431 County Taxes 70,376,489 67,813,075 76,799,189 77,240,820 75,588,059 County Share of Added and Omitted Taxes 541,190 521,701 Special District Taxes 5,316,333 4,882,403 3,870,357 3,079,514 2,887,806 Interfund Reserve Established 4,469,527 18,538,945 231,772 302,365 5,199,781 Interfunds Receivable Adjustments 4,226,327 Prior Year Senior Citizens Deduction Disallowed 33,750 1,803 71,676 Interfunds Payable Adjustments 701,343 Interfunds Payable Stale Dated Balance Sheet Items 39,692 Reserve for Tax Appeals Pending 259,583 2,320,643 Reserve for Protested Checks 981,263 810,761 45,208 Reserve for Petty Cash Fund 252 1,100 1,700 Prior Year Revenue Refunded 508,666 239,783 458,939 38,239 116,207 Applied to Operations Miscellaneous - Municipal Open Space 1,234,595 19,233 Elimination of Invalid Prior Year Bank Reconciliation Items 7,167,529 Cancellation of Protested Checks Receivable 452,682 840,932,799 817,060,093 820,565,999 784,844,227 808,433,036

Excess in Revenue 23,554,236 4,864,158 10,865,463

Deficit in Revenue $ (22,419,798) $ (30,121,209) Adjustments to Income: Expenditures Included Above Which Are By Statute Deferred Charges to Budget of Succeeding Year 6,000,000 $ - $ - 6,500,000 7,000,000 Statutory Excess (Deficit) in Revenue 29,554,236 - - 11,364,158 17,865,463

Fund Balance - January 1 - - 11,411,388 17,872,230 25,756,767 29,554,236 - 11,411,388 29,236,388 43,622,230 Decreased by: Utilized as Anticipated Revenue - - 11,411,388 17,825,000 25,750,000

Fund Balance - December 31 $ 29,554,236 $ - $ - $ 11,411,388 $ 17,872,230

ANALYSIS OF FUND BALANCE

Unaudited Audited 2015 2014 2013 2012 2011 Cash $ 142,513,712 $ 69,811,215 $ 65,303,563 $ 138,674,066 $ 62,054,075 Total 142,513,712 69,811,215 65,303,563 138,674,066 62,054,075 Less: Liabilities 167,240,907 120,369,789 95,810,772 127,317,678 44,219,845 Cash Surplus (Deficit) (24,727,195) (50,558,574) (30,507,209) 11,356,388 17,834,230 Add: Noncash Assets Pledged to Surplus: Deferred Charges 54,281,431 50,558,574 30,507,209 55,000 38,000 Fund Balance $ 29,554,236 $ - $ - $ 11,411,388 $ 17,872,230 ______

See accompanying notes to financial statements. B-5 CITY OF NEWARK

CURRENT FUND - COMPARATIVE STATEMENT OF REALIZED REVENUE

Unaudited Audited 2015 2014 2013 2012 2011

Taxes for Municipal Purposes $ 225,604,132 $ 209,075,153 $ 174,847,246 $ 192,292,288 $ 181,618,401 Less: Reserve for Uncollected Taxes 16,201,150 16,650,211 15,656,000 15,150,000 15,527,000 Taxes Collected for Municipal Purposes 209,402,982 192,424,942 159,191,246 177,142,288 166,091,401

General Revenue Municipal Court 11,393,774 11,869,556 13,565,141 13,516,345 12,978,327 Construction Fees 4,077,512 4,673,626 4,765,692 2,886,362 2,650,210 Host Fees 6,010,490 5,506,336 5,270,765 5,439,799 5,255,563 Interest on Investment and Deposits 237,969 101,218 90,325 Fox Lance Limited Dividend Receipts 18,577,051 17,619,324 15,172,226 20,373,972 17,374,117 Reimbursement for In-Kind, Administrative and Fringe Benefits 5,000,000 5,000,000 6,249,257 5,740,694 6,721,538 Revenue from New Taxes: Payroll Tax 48,768,086 34,034,645 41,892,052 41,102,235 44,259,442 Hotel Occupancy Tax 6,434,053 5,168,994 6,264,324 6,080,345 5,634,164 Parking Lot Receipts 22,454,387 15,271,393 20,669,184 20,000,953 25,363,596 Port Newark Lease - Port Authority of New York and New Jersey 84,744,312 84,744,312 84,744,312 84,745,281 71,625,219 Receipts from Delinquent Taxes 10,585,258 20,873,024 9,166,110 15,059,541 30,528,329 Interest and Costs on Taxes 3,698,980 5,608,065 4,080,692 3,755,898 6,114,308 Rents and Sale of Municipal Property 482,474 1,603,469 467,912 392,717 583,447 Other 42,667,432 36,767,142 34,570,828 27,256,001 16,648,094 Fund Balance Anticipated 11,411,388 17,825,000 25,750,000 Unidentified 4,755,809

Other Revenue State Aid Without Offsetting Appropriations 111,290,117 110,588,864 101,290,117 101,190,117 123,290,117 State Aid for School Debt 5,370,397 5,448,045 5,916,458 7,515,706 7,258,368 Revenues from Public and Private Sources with Offsetting Appropriations 66,343,191 46,546,874 70,269,008 46,161,034 62,396,813

$ 662,294,274 $ 603,849,829 $ 595,047,037 $ 596,184,288 $ 630,523,052

______

See accompanying notes to financial statements.

B-6 CITY OF NEWARK

CURRENT FUND - COMPARATIVE STATEMENT OF EXPENDITURES - REGULATORY BASIS

Unaudited Audited GENERAL APPROPRIATIONS - 2015 2014 2013 2012 2011 APPROPRIATIONS WITHIN "CAPS" Expended Expended Expended Expended Expended

Office of the Mayor and Agencies $ 14,479,516 $ 14,669,372 $ 14,917,417 $ 15,054,312 $ 15,500,627 City Clerk and Municipal Council 8,780,290 10,236,142 8,612,072 10,252,882 10,965,026 Department of Administration 16,164,169 16,902,758 17,145,911 23,516,639 16,040,289 Department of Law 5,068,094 5,200,603 5,267,545 5,408,877 3,771,237 Department of Finance 5,520,005 5,133,583 5,057,618 5,245,570 4,849,000 Department of Police 130,151,028 126,218,323 129,390,751 130,629,817 129,599,123 Department of Fire 69,001,261 69,028,914 65,728,118 65,089,371 64,332,183 Department of Engineering 35,902,600 33,642,181 34,550,277 32,221,920 34,428,283 Department of Child and Family Well-Being 8,631,501 8,014,850 8,202,790 8,113,723 8,282,123 Department of Economic and Housing Development 2,476,137 1,991,884 2,391,436 2,159,681 2,289,977 Department of Neighborhood and Recreational Services 28,676,751 30,977,374 29,375,947 27,378,704 30,621,871 B Unclassified Purposes 111,937,485 100,079,442 100,164,083 91,035,487 99,124,839

- Deferred Charges 5,925,143 3,088,426 707,297 512,034 7 Statutory Expenditures 62,995,416 61,741,110 64,498,762 67,310,593 68,681,121 Judgments 201,632 450,000 450,000 449,551 Deficit - Water Utility Fund 788,618

Total Appropriations Within "CAPS" 505,911,028 486,924,962 485,752,727 485,363,491 489,447,284

GENERAL APPROPRIATIONS - APPROPRIATIONS EXCLUDED FROM "CAPS"

Other Operations 16,045,628 14,818,041 16,577,679 15,174,917 14,977,759 Public and Private Programs 68,312,578 47,438,813 71,185,197 46,985,284 64,120,141 Capital Improvements 100,000 100,000 100,000 150,000 100,000 Municipal Debt Service 43,217,389 37,017,935 40,428,150 30,922,245 35,111,734 Deferred Charges 2,700,000 3,500,000 3,500,000 2,200,000 1,596,000 Type I District School Debt Service 10,654,818 10,763,880 11,631,618 14,179,455 14,890,601

Total Appropriations Excluded from "CAPS" 141,030,413 113,638,669 143,422,644 109,611,901 130,796,235

Less: Unidentified (1,860,000)

Total Appropriations $ 645,081,441 $ 600,563,631 $ 629,175,371 $ 594,975,392 $ 620,243,519

______

See accompanying notes to financial statements. CITY OF NEWARK

GENERAL TRUST FUND - COMPARATIVE BALANCE SHEET - REGULATORY BASIS Sheet #1

Unaudited Audited Balance Balance Balance Balance Balance ASSETS Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Assessment Fund Cash $ 16,676 $ 16,676 $ 7,254 $ 7,254 $ 7,254 Assessments Receivable 95,854 95,854 95,854 145,240 171,511 Assessment Liens 710,569 710,569 710,569 710,570 779,598 Assessment Lien Interest and Cost 59,946 59,946 59,946 59,946 59,946 Interfunds Receivable 402,305 278,732 288,155 238,768 95,062 1,285,350 1,161,777 1,161,778 1,161,778 1,113,371

Animal Control Trust Fund Cash 28,571 28,019 25,558 21,228 25,482 Interfunds Receivable 3,084 31,655 28,019 25,558 21,228 25,482

Other Funds Cash 38,522,508 30,913,482 38,220,766 30,807,565 26,997,602 Investments Interfunds Receivable 3,024,209 3,695,078 265,062 19,244 615 Overpayments Receivable 19,539 19,539 19,539 Other Receivables 501 20,151 20,151 20,151 Protested Checks 427,139 427,139 427,139 Reserve for Salary Increase 140 41,547,218 34,608,560 38,952,657 31,293,778 27,465,046

Insurance Fund Cash and Investments 11,416,613 14,284,278 13,268,350 7,748,785 2,775,361 Interfunds Receivable 227,634 350,354 678,495 368,455 83,440 Protested Checks 305 305 305 11,644,247 14,634,632 13,947,150 8,117,545 2,859,106

Grant Fund Cash and Investments 9,001,615 11,420,560 12,472,945 11,757,782 10,499,343 Interfunds Receivable 286,064 299,211 Accounts Receivable 75,801 869,159 195,801 775,942 944,951 Protested Checks 25,238 25,238 25,238 9,363,480 12,588,930 12,693,984 12,558,962 11,469,532

Payroll Agency Fund Cash 213,768 11,504,532 7,888,913 2,037,129 5,508,340 Interfunds Receivable 5,450,261 218,894 219,255 10,326 10,326 Unallocated 219,040 Protested Checks 7,920 7,920 7,920 5,664,029 11,723,426 8,116,088 2,055,375 5,745,626

$ 69,535,979 $ 74,745,344 $ 74,897,215 $ 55,208,666 $ 48,678,163

B-8 CITY OF NEWARK

GENERAL TRUST FUND - COMPARATIVE BALANCE SHEET - REGULATORY BASIS Sheet #2

Unaudited Audited LIABILITIES, RESERVES AND Balance Balance Balance Balance Balance FUND BALANCES Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Assessment Fund Overpayments $ 5,348 $ 5,348 $ 5,348 $ 5,348 $ 5,348 Prepaid Assessments 1,029 1,029 1,029 1,029 1,029 Reserves for Assessments and Liens 806,423 806,423 806,424 855,810 951,109 Reserves for Assessment Lien: Interest and Costs 59,946 59,946 59,946 59,946 59,946 Fund Balance 412,604 289,031 289,031 239,645 95,939 1,285,350 1,161,777 1,161,778 1,161,778 1,113,371

Animal Control Trust Fund Interfunds Payable 1,921 4,671 4,671 4,691 Due to State of New Jersey 6,478 6,439 6,417 6,993 7,057 Reserve for Expenditures 25,177 19,659 14,470 9,564 13,734 31,655 28,019 25,558 21,228 25,482

Other Funds Interfunds Payable 2,856,213 29,192 29,342 39,669 65,036 Reserve for Other Funds 38,667,050 34,555,413 38,899,359 31,215,303 27,376,055 Other Liabilities 23,955 23,955 23,955 38,805 23,954 Fund Balance 1 1 1 41,547,218 34,608,560 38,952,657 31,293,778 27,465,046

Insurance Fund Interfunds Payable 265,328 5,347 4,689 Reserves for: Worker's Compensation 3,330,624 2,743,945 1,614,154 646,367 178,868 State Unemployment Fund 2,255,851 2,673,193 2,792,298 1,011,675 289,712 Liability Fund 5,792,444 9,212,147 9,540,698 6,454,814 2,390,526 11,644,247 14,634,632 13,947,150 8,117,545 2,859,106

Grant Fund Reserves for: Municipal Tonnage Grant 724,467 3,150,060 3,142,203 2,962,993 2,624,277 Community Development Block Grant 62,643 728,464 1,104,289 1,189,530 432,865 Other Grants 3,057,816 Demolition Liens 502,632 502,632 502,632 502,632 502,632 Interfunds Payable 271,869 121,469 46,833 Balanced Housing Grant 4,672,519 4,974,600 4,851,799 4,828,117 4,805,109 Urban Development 2,203,065 2,203,065 2,203,065 2,203,065 Community Economic Development Trust 179,529 161,884 143,240 125,869 Revolving Development Trust Fund 746,756 746,756 746,756 746,756 9,363,480 12,588,930 12,693,984 12,558,962 11,469,532

Payroll Agency Fund Payroll Deductions Payable 5,664,029 11,657,778 8,059,634 1,998,920 2,178,692 Reserve for Impress 2,802 Vouchers Payable 147 147 147 Interfunds Payable 60,636 54,097 54,098 3,564,577 Reserve for Homestead Rebate 2,210 2,210 2,210 2,210 5,664,029 11,723,426 8,116,088 2,055,375 5,745,626

$ 69,535,979 $ 74,745,344 $ 74,897,215 $ 55,208,666 $ 48,678,163

______

See accompanying notes to financial statements.

B-9 CITY OF NEWARK

GENERAL CAPITAL FUND - COMPARATIVE BALANCE SHEET - REGULATORY BASIS

Unaudited Audited Balance Balance Balance Balance Balance ASSETS AND DEFERRED CHARGES Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Cash $ 18,966,837 $ 22,611,086 $ 19,122,915 $ 37,302,505 $ 25,331,430 Investments and Certificate of Deposits 800,000 1,600,000 2,400,000 Deferred Charges to Future Taxation: Funded 316,875,035 284,347,035 306,872,035 330,667,711 347,243,388 Unfunded 78,965,489 116,862,489 110,623,380 112,666,380 114,674,380 Interfunds Receivable 104,877 1,428,537 104,877 254,877 106,554 Deferred Charge: Newark Housing Authority - Guarantee 60,680,000 62,020,000 63,340,000 64,575,000 65,770,000 Due from State of New Jersey 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 Due from Board of Education - Cost of Issue 254,184 254,184 237,838 228,863 228,863 Due from ECIA 22,134,637 22,134,637 24,608,176 24,608,176 24,608,175

$ 500,481,059 $ 512,157,968 $ 528,209,221 $ 574,403,512 $ 582,862,790

LIABILITIES, RESERVES AND FUND BALANCE

General Serial Bonds $ 255,598,035 $ 220,140,035 $ 234,855,035 $ 250,425,035 $ 256,640,035 School Serial Bonds 59,527,000 62,332,000 70,017,000 78,012,000 88,142,000 Bond Anticipation Notes 13,833,000 67,989,000 58,764,000 59,498,000 42,403,000 Reserve for Refunds 335,104 266,776 266,776 Improvement Authorizations: Funded 14,979,139 23,101,190 15,423,528 18,345,513 21,194,520 Unfunded 57,390,800 41,654,483 47,558,241 69,610,358 79,020,466 Reserve for Encumbrances 8,236,760 9,656,967 9,934,439 Capital Improvement Fund 1,675,544 1,575,544 1,475,544 1,375,544 1,225,544 Reserve for Improvements Funded by ECIA 21,700,000 21,700,000 24,173,539 24,173,539 24,173,539 Guarantee - Newark Housing Authority 60,680,000 62,020,000 63,340,000 64,575,000 65,770,000 Interfunds Payable 4,194,545 24,000 1,359,560 State Trust Loan Payable 1,750,000 1,875,000 2,000,000 2,230,676 2,461,352 Fund Balance 916,236 113,749 308,791 5,891,071 205,998

$ 500,481,059 $ 512,157,968 $ 528,209,221 $ 574,403,512 $ 582,862,790

Bonds and Notes Authorized and Issued: General $ 65,132,489 $ 48,873,489 $ 51,859,380 $ 53,168,380 $ 72,271,380

______

See accompanying notes to financial statements.

B-10 CITY OF NEWARK

WATER UTILITY FUND - COMPARATIVE BALANCE SHEETS - REGULATORY BASIS Sheet #1

Unaudited Audited Balance Balance Balance Balance Balance ASSETS AND DEFERRED CHARGES Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Operating Section Cash $ 41,824 $ 5,656,373 $ 11,302,235 $ 9,402,756 $ 10,949,123 Consumer Accounts Receivable 12,472,851 11,482,089 11,320,303 12,095,775 10,809,176 Sundry Accounts Receivable 357,625 326,459 317,285 328,683 224,398 Delinquent Water Rents Receivable 3,667 3,667 11,612 11,612 3,795 Water Liens Receivable 438,820 1,785,538 1,492,361 1,492,361 1,163,552 Inventory 607,958 607,958 607,958 607,958 607,957 Protested Checks 73,649 83,289 151,198 142,678 Other Receivables 86,000 86,000 86,000 86,000 86,000 Interfunds Receivable 24,290,913 9,659,493 869,398 Petty Cash 950 950 950 950 950 38,300,608 29,682,176 25,221,993 25,046,691 23,987,629

Capital Section Cash 96,257 144,824 686,623 (475,836) 1,231,738 Due from State of New Jersey 2,673,200 2,673,200 Interfunds Receivable 2,635 2,635 15,135 15,135 2,634 Cost of Bond Issue 57,363 57,363 57,363 Due from State of New Jersey 968,019 968,019 968,019 968,019 968,019 Deferred Charge - Capitalization of Interest 850,931 998,919 1,146,907 1,294,895 1,442,883 Fixed Capital 149,748,384 149,748,384 146,252,307 142,852,424 138,386,609 Due from State of New Jersey - Waste Water Loan 3,596,142 3,596,142 3,596,142 2,101,997 4,368,155 Fixed Capital Authorized and Uncompleted 173,873,436 173,873,436 173,873,436 160,623,436 160,623,436 329,135,804 329,332,359 326,595,932 310,110,633 309,754,037

$ 367,436,412 $ 359,014,535 $ 351,817,925 $ 335,157,324 $ 333,741,666

B-11 CITY OF NEWARK

WATER UTILITY FUND - COMPARATIVE BALANCE SHEETS - REGULATORY BASIS Sheet #2

Unaudited Audited LIABILITIES, RESERVES AND Balance Balance Balance Balance Balance FUND BALANCE Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Operating Section Appropriation Reserves and Encumbrances $ 5,330,643 $ 6,146,021 $ 5,156,704 $ 7,307,580 $ 4,995,818 Accounts Payable 7,271,251 4,629,191 2,901,810 2,409,512 1,533,767 Accrued Interest on Bonds and Notes 137,571 158,100 173,722 188,987 158,757 Belleville Flood Control 994 994 994 994 994 Reserve for Overpayments and Credits 285,157 85,081 61,439 215,080 187,822 Reserve for Water Easement 236,000 236,000 236,000 236,000 236,000 Interfunds Payable 37,378 217,018 Reserves for: Petty Cash 950 950 950 950 950 Consumer Accounts Receivable 12,472,851 11,482,089 11,320,303 12,095,776 10,809,176 Sundry Accounts 357,625 326,459 317,285 328,683 224,398 Inventory 607,958 607,958 607,958 607,958 607,958 Protested Checks 73,649 83,289 151,198 142,678 Water Liens 438,820 1,785,538 1,492,361 1,492,361 1,163,552 Delinquent Water Rents 3,667 3,667 11,612 11,612 3,795 Fund Balance 11,157,121 4,146,479 2,820,188 3,704,946 38,300,608 29,682,176 25,221,993 25,046,691 23,987,629

Capital Section State Water Supply Loan Payable 23,319,013 24,856,187 26,359,068 27,835,181 29,268,337 Serial Bonds 15,942,000 17,602,000 19,587,000 21,602,000 23,657,000 Improvement Authorizations: Funded 7,867,623 7,872,623 7,880,123 7,880,123 9,392,221 Unfunded 11,752,900 28,730,763 28,448,003 17,397,695 17,201,199 Encumbered 18,209,841 1,721,196 4,067,136 1,884,039 4,529,669 Interfunds Payable 2,036,635 1,590,983 46,000 46,000 46,000 Reserve for Refunds Not Applied 85,965 85,966 85,966 Capital Improvement Fund 2 2 2 2 2 Reserve for Deferred Amortization 30,576,667 32,079,549 30,576,668 30,576,668 30,576,667 Reserve for Amortization 212,629,389 208,077,322 202,744,233 196,001,225 188,195,242 Reserve for Due from State of New Jersey 968,019 968,019 968,019 968,019 968,019 Reserve for Amortization - Revaluation of Watershed 5,780,431 5,780,431 5,780,431 5,780,431 5,780,431 Fund Balance 53,284 53,284 53,284 53,284 53,284 329,135,804 329,332,359 326,595,932 310,110,633 309,754,037

$ 367,436,412 $ 359,014,535 $ 351,817,925 $ 335,157,324 $ 333,741,666

Bonds and Notes Authorized $ 36,179,251 $ 36,179,251 $ 36,179,251 $ 22,929,251 $ 22,929,251

______

See accompanying notes to financial statements.

B-12 CITY OF NEWARK

WATER UTILITY OPERATING FUND - COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS

Unaudited Audited Balance Balance Balance Balance Balance Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Revenue and Other Income Surplus Anticipated $ 4,080,000 $ 854,000 $ $ 3,704,946 $ 3,705,000 Water Rents 52,430,374 47,218,766 45,890,706 48,022,818 47,757,169 Public and Private Funds 164,000 Lien Sale Proceeds 93,186 Deficit - General Budget 788,494 Other Credits to Income: Appropriation Reserves Lapsed 2,996,259 1,026,951 3,328,074 150,881 3,929,299 Accounts Payable Cancelled 132,405 1,401,000 Interest on Bonds Cancelled Nonbudgeted Revenue 140,794 1,053,701 740,939 4,178 13,005 Miscellaneous 179 67,909 59,647,427 50,286,002 50,027,628 54,236,317 55,497,659

Expenditures Operating 39,027,366 39,140,613 37,289,695 42,790,969 39,945,198 Debt Service 4,459,561 4,670,607 4,934,449 5,036,054 4,634,399 Deferred Changes and Statutory Expenditures 956,887 1,099,134 1,093,331 1,070,000 825,357 Special Items Capital Improvements 4,098,628 2,967,316 3,814,512 5,323,684 4,085,000 48,542,442 47,877,670 47,131,987 54,220,707 49,489,954 Prior Years Revenue Refunded 14,343 120,466 75,453 7,091 2,262 Reserve for Protested Checks 8,519 1,154 Cancellation of Assets and Payroll Transfer 107,575 48,556,785 48,105,711 47,207,440 54,236,317 49,493,370

Excess in Revenue 11,090,642 2,180,291 2,820,188 - 6,004,289

Statutory Excess to Operating Fund Balance 11,090,642 2,180,291 2,820,188 - 6,004,289

Fund Balance January 1 4,146,479 2,820,188 - 3,704,946 1,405,657 15,237,121 5,000,479 2,820,188 3,704,946 7,409,946

Decreased by: Utilized as Anticipated Revenue 4,080,000 854,000 3,704,946 3,705,000

Fund Balance December 31 $ 11,157,121 $ 4,146,479 $ 2,820,188 $ - $ 3,704,946

______

See accompanying notes to financial statements.

B-13 CITY OF NEWARK

SEWER UTILITY FUND - COMPARATIVE BALANCE SHEET - REGULATORY BASIS

Unaudited Audited Balance Balance Balance Balance Balance ASSETS AND DEFERRED CHARGES Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Operating Section Cash $ 7,264,189 $ 2,984,810 $ 2,957,199 $ 3,723,508 $ 2,242,537 Consumer Accounts Receivable 13,033,195 10,939,466 9,527,231 9,151,157 10,338,004 Sewer Connection Arrears 4,940 4,940 4,940 4,940 4,940 Delinquent Sewer Receivable 11,909 11,909 11,909 11,909 4,969 Sewer Liens Receivable 1,783,752 3,595,180 3,167,456 3,167,456 2,876,604 Interfunds Receivable 2,228,209 1,617,498 145,972 145,971 1,916,403 Deferred Charges 1,594,779 24,326,194 20,748,582 15,814,707 16,204,941 17,383,457

Capital Section Cash 20,029 1,435,578 610,646 (5,138,498) (2,566,414) Interfunds Receivable 492,195 Fixed Capital Authorized and Uncompleted 169,109,293 169,109,293 168,556,868 145,609,080 144,876,750 State Grant Receivable 1,397,960 1,397,960 1,397,960 1,397,960 1,397,960 Waste Water Treatment Funds - Due from State 21,591,769 26,805,440 19,851,073 32,391,012 42,044,794 192,611,246 198,748,271 190,416,547 174,259,554 185,753,090

$ 216,937,440 $ 219,496,853 $ 206,231,254 $ 190,464,495 $ 203,136,547

LIABILITIES, RESERVES AND FUND BALANCE

Operating Section Appropriation Reserves $ 669,040 $ 1,120,830 $ 976,226 $ 846,137 $ 286,921 Appropriation Reserves - Encumbered 761,048 1,352,820 1,304,038 2,019,236 1,428,865 Interfunds Payable 1,277,465 2,901,883 8,032 80,899 102,813 Commitments Payable 651,782 620,478 65,918 140,060 Sewer Overpayments 552,369 169,772 154,947 551,393 388,995 Accrued Payroll 28,737 28,737 28,737 Due to Tax Collector 8 8 8 Reserve for: Consumers' Accounts Receivable 13,033,195 10,939,466 9,527,231 9,151,157 10,338,004 Delinquent Sewer Rents Receivable 11,909 11,909 11,909 11,909 4,969 Sewer Liens Receivable 1,783,752 3,595,180 3,167,456 3,167,456 2,876,604 Sewer Connection Arrears 4,940 4,940 4,940 4,940 4,940 East Orange-Passaic Valley Sewerage Commission Fund Balance 6,232,476 10,705 277,151 1,782,541 24,326,194 20,748,582 15,814,707 16,204,941 17,383,457

Capital Section Due to Sewer Operating Fund 145,972 145,971 145,971 1,895,971 Waste Water Treatment Trust Loan Payable 24,105,000 26,065,000 25,227,026 27,529,879 29,731,123 Waste Water Treatment Fund Loan Payable 45,484,018 48,777,796 44,473,143 47,704,255 52,720,724 Improvement Authorizations: Funded 16,634,375 16,753,547 13,398,297 14,402,296 17,051,247 Unfunded 31,083,280 31,103,041 44,427,207 22,756,752 21,218,142 Encumbered 8,065,406 9,782,211 9,093,278 14,725,767 21,566,497 Vouchers Payable 1 1 1 Interfunds Payable 148,607 4,264,467 2,635 2,635 2,635 Deferred Reserve for Amortization 66,051,145 60,797,367 52,511,489 45,700,191 40,207,833 Reserve for Sewer Construction Grant 1,039,415 1,058,870 1,137,500 1,291,807 1,358,917 192,611,246 198,748,271 190,416,547 174,259,554 185,753,090

$ 216,937,440 $ 219,496,853 $ 206,231,254 $ 190,464,495 $ 203,136,547

Bonds and Notes Authorized but Not Issued $ - $ 33,469,130 $ 46,345,210 $ 24,674,754 $ 22,217,070

______

See accompanying notes to financial statements. B-14 CITY OF NEWARK

SEWER UTILITY OPERATING FUND - COMPARATIVE STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCE - REGULATORY BASIS

Unaudited Audited Balance Balance Balance Balance Balance Dec. 31, 2015 Dec. 31, 2014 Dec. 31, 2013 Dec. 31, 2012 Dec. 31, 2011

Revenue and Other Income Surplus $ $ 10,705 $ 277,150 $ 1,780,000 $ 385,842 Sewer Rentals 49,852,835 49,661,807 51,977,346 48,028,152 53,727,961 East Orange - Passaic Valley Sewer Commission 2,707,606 1,464,629 2,422,878 2,445,681 2,540,657 Lien Sales - Proceeds 1,201,266 387,940 Nonbudget Revenue 316,654 108,840 52,471 45,032 45,772 Appropriation Reserves Lapsed 2,688,852 1,230,664 849,107 382,695 1,098,691 Commitments Payable Cancelled 28,745 601,418 55,565,947 52,505,390 55,578,952 54,484,244 58,186,863

Expenditures Operating 41,744,122 46,930,986 47,877,507 43,951,031 49,983,073 Capital Outlay 750,000 500,000 550,000 1,334,500 1,050,000 Debt Service 6,417,936 6,105,966 6,584,741 6,083,803 5,628,798 Deferred Charges and Statutory Expenditures 421,413 560,720 556,000 506,000 556,000 Cancellation of Payroll Transfer 2,497 49,333,471 54,100,169 55,568,248 51,875,334 57,217,871

Excess (Deficit) in Operations 6,232,476 $ (1,594,779) 10,704 2,608,910 968,992

Fund Balance Balance January 1 - $ 10,705 277,151 1,782,541 1,199,391 6,232,476 10,705 287,855 4,391,451 2,168,383

Decreased by: Utilized as Anticipated Revenue - 10,705 277,150 1,780,000 385,842 Transferred to Current Fund as Anticipated Revenue - 2,334,300 - 10,705 277,150 4,114,300 385,842

Balance December 31 $ 6,232,476 $ - $ 10,705 $ 277,151 $ 1,782,541

______

See accompanying notes to financial statements.

B-15

NOTES TO FINANCIAL STATEMENTS

B-16

CITY OF NEWARK

NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2014

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Reporting Entity

The City of Newark is organized as a Mayor-Council form of government pursuant to the Optional Municipal Charter Law Plan C under the provisions of N.J.S. 40:69A-1 et seq., commonly known as the Faulkner Act. Under this system, the Mayor functions as the chief executive and the nine member Municipal Council functions as the legislative body. The Mayor and Council are elected at the regular municipal election for a term of four years. One council member is elected from each of the City’s five wards and four council members are elected at large.

Governmental Accounting Standards Board (GASB) Statement 14 establishes certain standards for defining and reporting on the financial reporting entity. In accordance with these standards, the reporting entity should include the primary government and those component units which are fiscally accountable to the primary government. The financial statements of the City of Newark include every board, body, officer or commission supported and maintained wholly or in part by funds appropriated by the City, as required by the provisions of N.J.S. 40A:5-5. The financial statements, however, do not include the operations of the Newark Board of Education, Library, Museum, Technical Schools, Newark Housing Authority and Newark Parking Authority, which are separate entities subject to separate examinations.

B. Description of Funds

The Governmental Accounting Standards Board (GASB) is the recognized standard setting body for establishing governmental accounting and financial reporting principles. The GASB establishes seven fund types and two account groups to be used by governmental units when reporting financial position and results of operations in accordance with generally accepted accounting principles (GAAP).

The accounting policies of the City of Newark conform to the accounting principles applicable to municipalities which have been prescribed by the Division of Local Government Services, Department of Community Affairs, State of New Jersey. Such principles and practices are designed primarily for determining compliance with legal provisions and budgetary restrictions and as a means of reporting on the stewardship of public officials with respect to public funds. Under this method of accounting, the City of Newark accounts for its financial transactions through the following separate funds which differ from the fund structure required by generally accepted accounting principles.

Current Fund – Encompasses resources and expenditures for basic governmental operations. Fiscal activity of Federal and State grant programs are reflected in a segregated section of the Current Fund.

Trust Funds – The records of receipts, disbursements and custodianship of monies in accordance with the purpose for which each account was created are maintained in Trust Funds. These include the Assessment Trust Fund, Animal Control Trust Fund, Other Trust Funds, Insurance Trust Fund, Grant Fund and Payroll Agency Trust Fund.

General Capital Fund – The receipts and expenditure records for the acquisition of general infrastructure and other capital facilities, other than those acquired in the Current Fund, are maintained in this Fund, as well as, related long-term debt accounts.

B-17

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Description of Funds (Continued)

Utilities Funds – Water and Sewer Utilities are treated as separate entities. Each maintains its own Operating and Capital Funds which reflect revenue, expenditures, stewardship, acquisitions of utility infrastructure and other capital facilities, debt service, long-term debt and other related activity.

Capital Fixed Assets – These accounts reflect estimated valuations of land, buildings and certain movable fixed assets of the City as discussed under the caption of “Basis of Accounting”.

C. Basis of Accounting

The accounting principles and practices prescribed for municipalities by the Division of Local Government Services, Department of Community Affairs, State of New Jersey, differ in certain respects from generally accepted accounting principles. The accounting system is maintained on the modified accrual basis with certain exceptions. Significant accounting policies in New Jersey are summarized as follows:

Property Taxes and Other Revenue

Property taxes and other revenue are realized when collected in cash or approved by regulation for accrual from certain sources of the State of New Jersey and the Federal Government. Accruals of taxes and other revenue are otherwise deferred as to realization by the establishment of offsetting reserve accounts. GAAP requires such revenue to be recognized in the accounting period when they become susceptible to accrual, reduced by an allowance for doubtful accounts.

Grant Revenue

Federal and State grants, entitlements or shared revenue received for purposes normally financed through the Current Fund are recognized when anticipated in the City of Newark. GAAP requires such revenue to be recognized in the accounting period when they become susceptible to accrual.

Expenditures

Expenditures for general and utility operations are generally recorded on the accrual basis. Unexpended appropriation balances, except for amounts which may have been cancelled by the governing body or by statutory regulation, are automatically recorded as liabilities at December 31st of each year, under the title of “Appropriation Reserves”. Amounts unexpended at the end of the second year are lapsed and are recorded as income.

Grant appropriations are charged upon budget adoption to create separate spending reserves.

Budgeted transfers to the Capital Improvement Fund are recorded as expenditures to the extent permitted by law.

Expenditures from Trust and Capital Funds are recorded upon occurrence and charged to accounts statutorily established for specific purposes.

Budget Appropriations for interest on General Capital Long-Term Debt is raised on the cash basis and is not accrued on the records; interest on Utility Debt is raised on the accrual basis and so recorded.

GAAP requires expenditures to be recognized in the accounting period in which the fund liability is incurred, if measurable, except for unmatured interest on general long-term debt, which should be recognized when due. B-18

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

C. Basis of Accounting (Continued)

Encumbrances

As of January 1, 1986 all local units were required by Technical Accounting Directive No. 85-1, as promulgated by the Division of Local Government Services, to maintain an encumbrance accounting system. The directive states that contractual orders outstanding at December 31st are reported as expenditures through the establishment of an encumbrance payable. Encumbrances do not constitute expenditures under GAAP.

Appropriation Reserves

Appropriation reserves are available, until lapsed at the close of the succeeding year, to meet specific claims, commitments or contracts incurred during the preceding year. Lapsed appropriation reserves are recorded as additions to income. Appropriation reserves do not exist under GAAP.

Compensated Absences

Expenditures relating to obligations for unused vested accumulated sick, vacation and compensatory pay are not recorded until paid. GAAP requires that the amount that would normally be liquidated with expendable available financial resources be recorded as an expenditure in the operating funds and the remaining obligations be recorded as a long-term obligation.

Property Acquired for Taxes

Property Acquired for Taxes (Foreclosed Property) should be recorded in the Current Fund at the assessed valuation during the year when such property was acquired by deed or foreclosure and is offset by a corresponding reserve account. GAAP requires such property to be recorded in the capital fixed assets at market value on the date of acquisition.

Self-Insurance Contributions

Contributions to self-insurance funds are charged to budget appropriations. GAAP requires that payments be accounted for as an operating transfer and not as an expenditure.

Interfunds Receivable

Interfunds Receivable in the Current Fund are generally recorded with offsetting reserves which are established by charges to operations. Collections are recognized as income in the year that the receivables are realized. Interfunds Receivable of all other funds are recorded as accrued and are not offset with reserve accounts. Interfunds Receivable of one fund are offset with Interfunds Payable of the corresponding fund. GAAP does not require the establishment of an offsetting reserve.

Inventories of Supplies

Materials and supplies purchased by all funds are recorded as expenditures.

An annual inventory of materials and supplies for the Water and Sewer Utility Funds are required, by regulation, to be prepared by City personnel for inclusion on the Water and Sewer Operating Fund balance sheets. Annual changes in valuations, offset with a Reserve Account, are not considered as affecting results of operations. Materials and supplies of other funds are not inventoried nor included on their respective balance sheets.

B-19

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

C. Basis of Accounting (Continued)

Capital Fixed Assets

General:

In accordance with Technical Accounting Directive No. 85-2, Accounting for Governmental Capital Fixed Assets, as promulgated by the Division of Local Government Services, which differs in certain respects from generally accepted accounting principles, the City of Newark has developed a capital fixed asset accounting and reporting system.

GAAP requires that capital fixed assets be capitalized at historical or estimated historical cost if actual historical cost is not available. Depreciation on utility capital fixed assets should also be recorded.

Capital Fixed Assets used in governmental operations (capital fixed assets) are accounted for in the Capital Fixed Assets. Public domain (“infrastructure”) capital fixed assets consisting of certain improvements other than buildings, such as roads, bridges, curbs and gutters, streets and sidewalks and drainage systems are not capitalized.

Acquisitions of land, buildings, machinery, equipment and other capital assets are recorded on a perpetual fixed asset record.

Vehicles, furniture, equipment and other items are reflected at replacement values at time of inventory preparation. Additions to the established capital fixed assets are valued at cost.

Depreciation of assets is not recorded as an operating expense of the City.

Utilities:

Capital acquisitions, including utility infrastructure costs of the Water and Sewer Utility Funds, are recorded at cost upon purchase or project completion in the Fixed Capital Account of the utilities. The Fixed Capital Accounts are adjusted for dispositions or abandonments. The accounts include movable fixed assets of the Utilities but are not specifically identified and are considered as duplicated in the Capital Fixed Assets. The duplication is considered as insignificant on its effect on the financial statements taken as a whole.

Utility improvements that may have been constructed by developers are not recorded as additions to Fixed Capital.

Fixed Capital of the Utility is offset by accumulations in Amortization Reserve Accounts. The accumulations represent costs of fixed assets purchased with budgeted funds or acquired by gift as well as grants, developer contributions or liquidations of related bonded debt and other liabilities incurred upon capital fixed asset acquisition.

The Fixed Capital Accounts reflected herein are as recorded in the records of the municipality and do not necessarily reflect the true condition of such Fixed Capital. The records consist of a control account only. Detailed records are not maintained.

D. Basic Financial Statements

The GASB Codification also defines the financial statements of a governmental unit to be presented in the general purpose financial statements to be in accordance with GAAP. The City of Newark presents the financial statements listed in the table of contents which are required by the Division of Local Government Services and which differ from the financial statements required by GAAP. In addition, the Division requires the financial statements listed in the table of contents to be referenced to the supplementary schedules. This practice differs from GAAP. B-20

2. CASH, CASH EQUIVALENTS AND INVESTMENTS

A. Cash and Cash Equivalents

New Jersey statutes permit the deposit of public funds in institutions located in New Jersey, which are insured by the Federal Deposit Insurance Corporation (FDIC) or any other agencies of the United States that insures deposits or the State of New Jersey Cash Management Fund.

The State of New Jersey Cash Management Fund is authorized by statute and regulations of the State Investment Council to invest in fixed income and debt securities which mature or are redeemed within one year. Twenty-five percent of the Fund may be invested in eligible securities which mature within two years provided, however, the average maturity of all investments in the Fund shall not exceed one year. Collateralization of Fund investments is generally not required.

In addition, by regulation of the Division of Local Government Services, municipalities are allowed to deposit funds in the Municipal Bond Insurance Association (MBIA) through their investment management company, the Municipal Investors Service Corporation.

In accordance with the provisions of the Governmental Unit Deposit Protection Act of New Jersey, public depositories are required to maintain collateral for deposits of public funds that exceed insurance limits as follows:

The market value of the collateral must equal five percent of the average daily balance of public funds, or

If the public funds deposited exceed 75 percent of the capital funds of the depository, the depository must provide collateral having a market value equal to 100 percent of the amount exceeding 75 percent.

All collateral must be deposited with the Federal Reserve Bank, The Federal Home Loan Bank Board or a banking institution that is a member of the Federal Reserve System and has capital funds of not less than $25,000,000.00.

B. Investments

New Jersey statutes permit the City to purchase the following types of securities:

. Bonds or other obligations of the United States of America or obligations guaranteed by the United States of America. This includes instruments such as Treasury bills, notes and bonds.

. Government money market mutual funds.

. Any federal agency or instrumentality obligation authorized by Congress that matures within 397 days from the date of purchase, and has a fixed rate of interest not dependent on any index or external factors.

. Bonds or other obligations of the local unit or school districts of which the local unit is a part.

. Any other obligations with maturities not exceeding 397 days, as permitted by the Division of Investments.

. Local government investment pools, such as New Jersey CLASS, and the New Jersey Arbitrage Rebate Management Program.

. New Jersey State Cash Management Fund.

. Repurchase agreements of fully collateralized securities subject to special conditions.

B-21

2. CASH, CASH EQUIVALENTS AND INVESTMENTS (Continued)

B. Investments (Continued)

In addition, a variety of State laws permit local governments to invest in a wide range of obligations issued by State Governments and its agencies.

As of December 31, 2014, the City had funds on deposit in checking and New Jersey Cash Management Accounts, Certificates of Deposit and Repurchase Agreements. These funds constitute “deposits with financial institutions” as defined by GASB Statement No. 3 and amended by GASB Statement No. 40. There were no securities categorized as investments as defined by GASB Statement No. 40.

3. TAXES AND TAX TITLE LIENS RECEIVABLE

Property assessments are determined on true values and taxes are assessed based upon these values. The residential tax bill includes the levies for the City, County and School purposes. Certified adopted budgets are submitted to the County Board of Taxation by each taxing district. The tax rate is determined by the board upon the filing of these budgets.

The tax bills are mailed by the Tax Collector annually and are payable in four quarterly installments due the first of August and November of the current year and a preliminary billing due the first of February and May of the subsequent year. The August and November billings represent the third and fourth quarter installments and are calculated by taking the total year tax levy less the preliminary first and second quarter installments due February and May. The preliminary levy is based on one-half of the current year’s total tax.

The Tax Collector’s balances include items which were not in the tax sale. The report includes taxes billed for added, omitted and added/omitted items in bankruptcy, installment agreements, appeals and other items which were not subject to be included in the tax sale.

Tax installments not paid by the above due dates are subject to interest penalties determined by a resolution of the governing body. The rate of interest in accordance with the aforementioned resolution is 8% per annum on the first $1,500 of delinquency and 18% on any delinquency in excess of $1,500. The resolution also sets a grace period of ten days before interest is calculated. In addition, any delinquency in excess of $10,000 at the end of the calendar year is subject to a 6% penalty on the unpaid balance.

Taxes unpaid on the 11th day of the eleventh month in the fiscal year when the taxes became in arrears are subject to the tax sale provisions of the New Jersey statutes. The municipality may institute in rem foreclosure proceedings after six months from the date of the sale if the lien has not been redeemed.

The following is a five year comparison of certain statistical information relative to property taxes and property tax collections for the current and previous four years:

Comparative Tax Rate Information

Apportionment of Tax Rate Assessed Tax Local Year Valuation Rate Municipal County School Library

2014 $ 12,435,612,111.00 $ 3.101 $ 1.581 $ 0.545 $ 0.937 $ 0.038 2013 12,979,522,245.00 2.953 1.455 0.578 0.882 0.038 2012 10,871,953,866.00 3.452 1.649 0.709 1.044 0.050 2011 10,839,929,709.00 3.328 1.607 1.688 1.033 2010 10,763,710,300.00 3.180 1.487 0.696 0.997

B-22

3. TAXES AND TAX TITLE LIENS RECEIVABLE (Continued)

Comparison of Tax Levies

Percentage Cash of Year Tax Levy Collections Collections

2014 $ 392,064,911.06 * $ 376,813,047.93 96.11 % 2013 377,472,385.47 * 348,817,914.76 92.41 2012 378,379,362.53 * 364,231,244.43 96.26 2011 365,247,783.34 * 348,166,900.86 95.32 2010 344,941,358.38 * 313,978,927.62 91.02

*Adjusted for reductions due to tax appeals in accordance with R.S. 54:3-21.

Delinquent Taxes and Tax Title Liens

Amount of Total Percentage Tax Title Delinquent Delinquent of Year Liens Taxes Taxes Tax Levy

2014 $ 37,188,531.04 $ 2,506,590.24 $ 39,695,121.28 10.12 % 2013 29,045,983.50 22,454,342.05 51,500,325.55 13.64 2012 27,954,820.15 683,874.16 28,638,694.31 7.56 2011 38,862,258.05 3,412,749.61 42,275,007.66 11.57 2010 27,844,215.19 24,879,957.42 52,724,172.61 15.28

4. PROPERTY ACQUIRED BY TAX TITLE LIEN LIQUIDATION

The value of property acquired by purchase, gift, deed and liquidation of tax title liens, on the basis of the last assessed valuation of such properties in the year of acquisition, was as follows:

Year Amount

2014 $ 131,612,758.28 2013 131,612,758.28 2012 131,224,637.97 2011 81,491,737.97 2010 81,491,737.97

5. WATER RENTS ACCOUNTS RECEIVABLE

The City of Newark maintains a Utility Fund for the billing and collection of water rents. A comparison of water rent billings and collections for the past five years are as follows:

Year Billings Collections

2014 $ 47,677,394.64 $ 46,316,460.94 2013 45,325,966.90 45,890,706.01 2012 48,886,604.28 46,279,562.45 2011 45,772,783.27 47,119,480.02 2010 44,131,767.80 42,421,842.05

The sums of billings and collections include interest penalties. Realization of prior year unpaid balances are also included in the collections above. B-23

6. SEWER CHARGES ACCOUNTS RECEIVABLE

The City of Newark maintains a Utility Fund for the billing and collection of sewer rents. A comparison of sewer rent billings and collections for the past five years are as follows:

Year Billings Collections

2014 $ 51,540,453.06 $ 49,661,806.90 2013 52,508,092.14 51,977,345.95 2012 48,298,467.01 48,028,151.88 2011 52,861,705.54 53,727,960.95 2010 54,942,128.40 53,082,382.33

The sums of billings and collections include interest penalties. Realization of prior year unpaid balances are also included in the collections above.

7. FUND BALANCE APPROPRIATED

Utilized in Budget of Balance Succeeding Year December 31 Year

Current Fund: 2014 $ - $ - 2013 - - 2012 11,411,387.66 12,904,747.74 2011 17,872,229.76 17,825,000.00 2010 25,756,766.82 25,750,000.00

Water Utility Operating Fund: 2014 4,146,479.30 880,000.00 2013 2,820,187.83 854,000.00 2012 2,753,607.41 - 2011 3,704,945.84 3,705,000.00 2010 1,405,657.37 1,405,000.00

Sewer Utility Operating Fund: 2014 - - 2013 10,704.85 77,200.00 2012 277,150.59 277,150.00 2011 1,782,540.84 1,780,000.00 2010 1,199,390.80 385,842.00

8. PENSION PLANS

Description of Systems

Substantially all of the City’s employees participate in one of the following contributory defined benefit public employee retirement systems which have been established by State statute: the Public Employees’ Retirement System (PERS) or the Police and Firemen’s Retirement System (PFRS). In addition, the City contributes to the Consolidated Police and Firemen’s Pension Fund (CPFPF). These systems are sponsored and administered by the New Jersey Division of Pensions and Benefits. The Public Employees’ Retirement System and the Police and Firemen’s Retirement System is considered a cost sharing multiple-employer plan.

B-24

8. PENSION PLANS (Continued)

Description of Systems (Continued)

Public Employees’ Retirement System:

The Public Employees’ Retirement System (PERS) was established in January, 1955 under the provisions of N.J.S.A. 43:15A to provide coverage including post-retirement health care to substantially all full-time employees of the State or any county, municipality, school district or public agency provided the employee is not a member of another State-administered retirement system. Membership is mandatory for such employees and vesting occurs after 8 to 10 years of service and 25 years for health care coverage. Members are eligible for retirement at age 60 with an annual benefit generally determined to be 1/55th of the average annual compensation for the highest three fiscal years’ compensation for each year of membership during years of creditable service. Early retirement is available to those under age 60 with 25 or more years of credited service. Anyone who retires early and is under age 55 receives retirement benefits as calculated in the above mentioned formula but at a reduced rate (one quarter of one percent for each month the member lacks of attaining age 55).

Police and Firemen’s Retirement System:

The Police and Firemen’s Retirement System (PFRS) was established in July, 1944 under the provisions of N.J.S.A. 43:16A to provide coverage to substantially all full-time county and municipal police or firemen and State firemen appointed after June 30, 1944. Membership is mandatory for such employees. Members may opt for Service Retirement if over age 55 or Special Retirement at any age if they have a minimum of 25 years of service or 20 years of service if enrolled in the PFRS as of January 18, 2000. Retirement benefits vary depending on age and years of service.

Chapter 428, Public Law of 1999, effective January 18, 2000, allows a member, age 55 and older with 20 or more years of service, to retire with a benefit equaling 50% of final compensation, in lieu of the regular retirement allowance available to the member. Final compensation means the compensation received by the member in the last twelve months of creditable service preceding retirement.

In addition, a member of the system as of the effective date of this law may retire with 20 or more years of service with a retirement allowance of 50% of final compensation, regardless of age, and, if required to retire because of attaining the mandatory retirement age of 65, an additional 3% of final compensation for every additional year of creditable service up to 25 years.

Consolidated Police and Firemen’s Pension Fund:

The Consolidated Police and Firemen’s Pension Fund (CPFPF) is a closed system with no active members and was established in January 1952 to provide coverage to municipal police and firemen who were appointed prior to July 1, 1944.

Employees’ Retirement System:

The Employees’ Retirement System was created in November 1954 by Ch. 218, P.L. 1954 by the merger of the former Newark Municipal Employees’ Pension Fund, Newark Board of Health Pension Fund and Newark Board of Workers’ Pension Fund as at January 1, 1955.

Additional legislation effective August 26, 1966, provides that in the fiscal year 1979, “the City shall increase its contributions by 13% of the amount of the salaries paid to all members of the Pension Fund in 1978 and in each fiscal year thereafter the contribution of the City shall be increased over the previous percentage by an additional 1% of the salaries paid to all members of the Pension Fund in the immediate preceding year until the actuary shall certify to the City that the total of the contributions made by the City, together with the contributions of the members and all earnings, is sufficient to meet the liabilities of the fund on a fully funded, reserve basis”.

B-25

8. PENSION PLANS (Continued)

Description of Systems (Continued)

Employees’ Retirement System: (Continued)

The plan provides a method for a permanent employee of the City to receive credit for all or part of the time served prior to joining the Retirement System by payment into the fund of an amount computed in the manner prescribed by the statute. The payment may be made in one lump sum or payroll deductions over a maximum of ten years. In accordance with Senate Bill 332 effective February 21, 1969, the employer is required to match the employee’s total prior service time purchase, without interest, as soon as the employee enters into the contract.

Effective January 1, 1972 (P.L. 1971, Ch. 277) a “cost of living” increase was granted to all retirees who were receiving a pension for at least three calendar years. The “ratio of increase”, which will apply to the pension originally granted, is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers of the United States Department of Labor. The “ratio of increase” will be reviewed annually by the Director of the Division of Pensions of the State Department of the Treasury to determine if there will be any changes to the “cost of living” increase originally granted. The employer shall bear the cost of the increase in the pensions payable to retirees who retired from the employ of such employer.

Additional legislation (P.L. 1981, Ch. 565), effective May 30, 1982, provided for the creation of a special account in the Pension Fund for all elected officials of the City of Newark. Elected officials must contribute at a rate of 5% of their salaries with the City contributing at a rate of 20% of their salaries.

The allocation of members’ contributions between current and prior years’ service payments is reflected on the basis of the allocations made by Administrators of the Fund.

The membership voted to join the State Pension Fund. The Commissioner approved the Social Security Referendum Certification number of 974 members who opted to go into the State Pension Fund on September 6, 1990.

To fund the future retirees we hereby quote N.J. Statute Section E of 43:13-22.29:

€ All moneys required to meet the City contributions provided for under this and all other sections of this act shall be appropriated annually in the City budget of the Governing Body. If at any time there is not sufficient money to meet the requirements of this system and pay the pensions or other benefits provided for herein, the Governing Body shall, from time to time, include in any tax levy a sum sufficient to meet the said requirements and payments of the retirement system, provided, however that no insufficiency of funds shall be made up by the City unless and until the commission shall have required deductions from employees at the maximum rates set forth in subsection (A) of this section L. 1954, c. 218, p. 824,27.

Significant Legislation

P.L. 2011, c. 78, effective June 28, 2011, made various changes to the manner in which PERS operates and to the benefit of that system.

This new legislation’s provisions impacting employee pension and health benefits include:

. New members of PERS hired on or after June 28, 2011 (Tier 5 members), will need 30 years of creditable service and age 65 for receipt of the early retirement benefit without a reduction of 1/4 to 1 percent for each month that the member is under age 65.

. The eligibility age to qualify for a service retirement in the PERS is increased from age 62 to 65 for Tier 5 members.

B-26

8. PENSION PLANS (Continued)

Significant Legislation (Continued)

. The annual benefit under special retirement for new PERS members enrolled after June 28, 2011 (Tier 3 members), will be 60 percent instead of 65 percent of the member’s final compensation plus 1 percent for each year of creditable service over 25 years but not to exceed 30 years.

. Active member contribution rates will increase. PERS active member rates increase from 5.5 percent of annual compensation to 6.5 percent plus an additional 1 percent phased-in over 7 years. For Fiscal Year 2012, the member contribution rates increased in October 2011. The phase-in of the additional incremental member contributions for PERS members will take place in July of each subsequent fiscal year.

. The payment of automatic cost-of-living adjustment (COLA) additional increases to current and future retirees and beneficiaries is suspended until reactivated as permitted by this law.

In addition, this new legislation changes the method for amortizing the pension systems’ unfunded accrued liability (from a level percent of pay method to a level dollar of pay).

Contributions Required and Made

In accordance with the provisions of Chapter 78, P.L. 2011, employee pension contribution rates will be increased for PERS from 5.5% to 6.5% and for PFRS from 8.5% to 10% of their base wages, respectfully. These increases will be effective with the first payroll amount to be paid on or after October 1, 2011.

Employee Contributions for PERS employees will be increased from 6.5% to 7.5% to be phased in equally over a 7 year period beginning July 2012. The contribution rate will increase by 0.14% each year with the first payroll of July until the 7.5% contribution rate is reached in July 2018. Employer contributions are actuarially determined on an annual basis by the Division of Pensions. All other employees are enrolled in the Newark Municipal Employees’ Pension Fund. Contributions to the plan for the past three (3) years are as follows:

PERS PFRS Year City Employees City Employees

2014 $ 6,855,428.04 $ * $ 44,3E2,706.85 $ * 2013 E,262,0E5.27 * 45,117,383.12 * 2012 10,732,471.58 * 45,324,660.00 *

Newark Municipal CPFRS Employees Year City City

2014 $ 67,457.86 $ 268,333.00 2013 287,441.76 400,000.00 2012 434,884.81 400,000.00

*Not Available – See Notes and Comments.

B-27

9. DEFINED CONTRIBUTION RETIREMENT PROGRAM

Description of System

The Defined Contribution Retirement Program (DCRP) was established on July 1, 2007 for certain public employees under the provisions of Chapter 92, P.L. 2007 and Chapter 103, P.L. 2007. The program provides eligible members, with a minimum base salary of $1,500.00 or more, with a tax- sheltered, defined contribution retirement benefit, in addition to life insurance and disability coverage. As of May 21, 2010, the municipal base salary required for eligibility in the DCRP was increased to $5,000.00. The DCRP is jointly administered by the Division of Pensions and Benefits and Prudential Financial.

If the eligible elected or appointed official will earn less than $5,000.00 annually, the official may choose to waive participation in the DCRP for that office or position. This waiver is irrevocable.

This retirement program is a new pension system where the value of the pension is based on the amount of the contribution made by the employee and employer and through investment earnings. It is similar to a Deferred Compensation Program where the employee has a portion of tax deferred salary placed into an account that the employee manages through investment options provided by the employer.

The law requires that three classes of employees enroll in the DCRP, detailed as follows:

• All elected officials taking office on or after July 1, 2007, except that a person who is reelected to an elected office held prior to that date without a break in service may remain in the Public Employees’ Retirement System (PERS).

• A Governor appointee with the advice and consent of the Legislature or who serves at the pleasure of the Governor only during that Governor’s term of office.

• Employees enrolled in the PERS on or after July 1, 2007 or employees enrolled in the PFRS after May 21, 2010 who earn salary in excess of established “maximum compensation” limits.

. Employees otherwise eligible to enroll in the PERS on or after November 2, 2008 who do not earn the minimum salary for PERS Tier 3, but who earn salary of at least $5,000.00.

. Employees otherwise eligible to enroll in the PERS after May 21, 2010, who do not work the minimum number of hours per week required for PERS Tier 4 or Tier 5 enrollment (32 hours per week) but who earn salary of at least $5,000.00 annually.

Notwithstanding the foregoing requirements other employees who hold a professional license or certificate or meet other exceptions are permitted to remain to join or remain in PERS.

Contributions Required and Made

Contributions made by employees for DCRP are currently at 5.5% of their base wages. Member contributions are matched by a 3.0% employer contribution.

During the year 2014, there were no officials or employees enrolled in the DCRP.

B-28

10. MUNICIPAL DEBT

The Local Bond Law governs the issuance of bonds and notes to finance general capital expenditures. All bonds are retired in serial installments within the statutory period of usefulness. Bonds issued by the City are general obligation bonds, backed by the full faith and credit of the City. Pursuant to N.J.S.A. 40A:2-8, bond anticipation notes, which are issued to temporarily finance capital projects, cannot be renewed past the third anniversary unless an amount equal to at least the first legal requirement is paid prior to each anniversary and must be paid off within ten years and five months or retired by the issuance of bonds. Bond anticipation notes, which are issued to temporarily finance capital projects, must be paid off within ten years and five months or retired by the issuance of bonds.

Summary of Municipal Debt (Excluding Current and Operating Debt) (and School if Applicable)

Year 2014 Year 2013 Year 2012

Issued General: Bonds and Notes $ 283,009,035.25 $ 293,619,035.25 $ 309,923,035.25 Guaranteed Bonds 62,020,000.00 63,340,000.00 64,575,000.00 State Loan 1,875,000.00 2,000,000.00 2,230,676.20 Water Utility: Bonds and Notes 17,602,000.00 19,587,000.00 21,602,000.00 State Water Loan 24,856,186.85 26,359,068.26 27,835,180.68 Sewer Utility: State Sewer Loan 74,842,796.30 69,850,384.75 75,234,133.41

Total Issued 464,205,018.40 474,755,488.26 501,400,025.54

Authorized but Not Issued General: Bonds and Notes 35,147,488.89 38,204,379.89 39,442,379.89 Water Utility: Bonds and Notes 36,179,250.74 36,179,250.74 22,929,250.74 Sewer Utility: Bonds and Notes 33,469,130.00 46,345,210.00 24,674,754.00

Total Unauthorized but Not Issued 104,795,869.63 120,728,840.63 87,046,384.63

$ 569,000,888.03 $ 595,484,328.89 $ 588,446,410.17

B-29

10. MUNICIPAL DEBT (Continued)

Summary of Statutory Debt Condition (Annual Debt Statement)

The summarized statement of debt condition which follows is prepared in accordance with the required method of setting up the Annual Debt Statement and indicates a statutory net debt of 2.488%.

Gross Debt Deductions Net Debt

Local School District Debt $ 81,178,000.00 $ 81,178,000.00 $ Water Utillity Debt 78,637,437.59 78,637,437.59 Sewer Utility Debt 108,311,926.30 51,372,503.10 56,939,423.20 General Debt 382,051,524.14 92,006,125.97 290,045,398.17

$ 650,178,888.03 $ 303,194,066.66 $ 346,984,821.37

Net Debt, $346,984,821.37 divided by Equalized Valuation Basis $13,945,933,184.33 per N.J.S. 40A:2-2, as amended, equals 2.488%.

Borrowing Power Under N.J.S. 40A:2-6 as Amended

3 1/2% of Equalized Valuation of Real Property $ 488,107,661.45

Net Debt 346,984,821.37

Remaining Borrowing Power $ 141,122,840.08

Calculation of “Self-Liquidating Purpose” Water Utility per N.J.S.A. 40A:2-4

Fund Balance and Cash Receipts from Fees, Rents or Other Charges for Year Including Surplus and Interest on Investments (Per P.L. 1991, Ch. 196) $ 49,126,468.05

Deductions: Operating and Maintenance Costs $ 38,080,459.14 Debt Service per Water Accounts 4,670,607.48 42,751,066.62

Excess in Revenue $ 6,375,401.43

There being an excess in revenue, all Water Utility Debt is deductible for debt statement purposes.

B-30

10. MUNICIPAL DEBT (Continued)

Calculation of “Self-Liquidating Purpose” Sewer Utility per N.J.S.A. 40A:2-4

Fund Balance and Cash Receipts from Fees, Rents or Other Charges for Year Including Surplus and Interest on Investments (Per P.L. 1991, Ch. 196) $ 51,245,980.61

Deductions: Operating and Maintenance Costs $ 47,986,986.00 Debt Service per Sewer Accounts 6,105,965.77 54,092,951.77

Deficit in Revenue $ (2,846,971.16)

There being a deficit in revenue, all Sewer Utility Debt is not deductible for debt statement purposes.

The deficit is capitalized at 5% and therefore the sum of $56,939,423.20 is included as net debt.

The foregoing debt information is in agreement with the amended Annual Debt Statement as filed by the Chief Financial Officer.

B-31

10. MUNICIPAL DEBT (Continued)

As of December 31, 2014, the City’s long-term debt is as follows:

General Obligation Bonds

$40,747,035.25, 2003 Pension Refunding Bonds due in annual installments of $890,704 to $1,960,000 through April 2033, interest at 5.13% to 5.75%. $ 13,187,035.25

$22,660,000, 2008 Pension Refunding Bonds due in annual installments of $1,550,000 to $2,575,000 through April 2022, interest at 5.603% to 5.853%. 16,205,000.00

$4,450,000, 2005 Redevelopment Refunding Bonds due in annual installments of $260,000 to $450,000 through October 2022, interest at 5.00%. 2,800,000.00

$120,670,000, 2010 General Improvement Bonds due in annual installments of $790,000 to $14,500,000 through June 2028, interest at 3.00% to 5.00%. 116,960,000.00

$5,283,000, 2010 Taxable General Improvement Bonds due in annual installments of $2,560,000 to $2,723,000 through June 2030, interest at 6.20% to 6.30%. 5,283,000.00

$24,890,000, 2010 General Refunding Bonds due in annual installments of $3,570,000 to $3,990,000 through October 2018, interest at 3.38% to 4.00%. 15,130,000.00

$36,235,000, 2013 General Improvement Refunding Bonds due in annual installments of $6,605,000 to $7,130,000 through July 2018, interest at 5.00%. 27,475,000.00

$4,550,000, 2013 General Taxable Improvement Refunding Bonds due in annual installments of $835,000 to $850,000 through July 2018, interest at 1.916% to 2.340%. 3,375,000.00

$20,505,000, 2013 Pension Taxable Refunding Bonds due in annual installments of $300,000 to $4,060,000 through April 2021, interest at 1.916% to 3.305%. 19,725,000.00

$ 220,140,035.25

State Trust Loan

$2,500,000 for a Demolition Loan with the State of New Jersey. The loan is repayable in 20 annual installments from 2009 to 2029. $ 1,875,000.00

B-32

10. MUNICIPAL DEBT (Continued)

State Trust Loan (Continued)

A schedule of annual debt service for the repayment of the State Trust Loan is as follows:

State Demolition Year Total Bond

2015 $ 125,000.00 $ 125,000.00 2016 125,000.00 125,000.00 2017 125,000.00 125,000.00 2018 125,000.00 125,000.00 2019 125,000.00 125,000.00 2020 125,000.00 125,000.00 2021 125,000.00 125,000.00 2022 125,000.00 125,000.00 2023 125,000.00 125,000.00 2024 125,000.00 125,000.00 2025 125,000.00 125,000.00 2026 125,000.00 125,000.00 2027 125,000.00 125,000.00 2028 125,000.00 125,000.00 2029 125,000.00 125,000.00

$ 1,875,000.00 $ 1,875,000.00

Water Utility Bonds

$23,160,000, 2005 Water Refunding Bonds due in annual installments of $635,000 to $1,225,000 through October 2021, interest at 3.50% to 4.070%. $ 7,170,000.00

$7,737,000, 2005 General Water Bonds due in annual installments of $325,000 to $360,000 through December 2019, interest at 4.10% to 4.50%. 5,275,000.00

$5,487,000, 2010 General Water Bonds due in annual installments of $110,000 to $363,000 through June 2039, interest at 4.00% to 5.00% 5,157,000.00

$ 17,602,000.00

Waste Water Treatment Loan Payable - Water Utility Fund

Loan agreements were entered into by the City of Newark with the Department of Environmental Protection for the purpose of improvements to the Water Treatment Plant. Loans outstanding at December 31, 2014 are detailed as follows:

Trust Loan $ 10,460,000.00

Fund Loan 14,396,186.85

It is noted that the Fund Loan was issued interest-free.

B-33

10. MUNICIPAL DEBT (Continued)

General Capital and Water Utility Bonds

A schedule of annual debt service for principal and interest for bonded debt is as follows:

General Capital* Water Utility Year Principal Interest Principal Interest

2015 $ 15,095,000.00 $ 8,934,228.25 $ 1,660,000.00 $ 774,408.75 2016 16,690,000.00 8,262,725.65 1,640,000.00 713,808.75 2017 19,015,000.00 7,565,482.70 1,620,000.00 652,683.75 2018 20,340,000.00 6,800,040.10 1,615,000.00 591,665.00 2019 20,370,000.00 5,927,837.70 1,630,000.00 514,912.50 2020 19,445,000.00 4,950,435.03 1,140,000.00 437,627.50 2021 18,055,000.00 4,012,802.88 1,135,000.00 384,880.00 2022 13,438,217.30 5,652,606.70 510,000.00 332,420.00 2023 11,976,810.65 5,377,983.35 515,000.00 311,195.00 2024 11,967,831.35 5,156,962.65 525,000.00 289,487.50 2025 10,262,922.20 4,946,871.80 530,000.00 267,175.00 2026 10,722,049.60 4,815,544.40 540,000.00 244,470.00 2027 11,212,321.65 4,684,272.35 550,000.00 220,890.00 2028 11,743,532.85 4,516,373.65 560,000.00 195,640.00 2029 3,480,525.55 4,344,743.45 570,000.00 169,800.00 2030 3,635,112.00 4,489,437.00 220,000.00 143,100.00 2031 903,130.80 4,636,869.20 235,000.00 132,100.00 2032 896,877.30 4,973,122.70 245,000.00 120,350.00 2033 890,704.00 5,329,296.00 260,000.00 108,100.00 2034 275,000.00 95,100.00 2035 290,000.00 81,350.00 2036 307,000.00 66,850.00 2037 324,000.00 51,500.00 2038 343,000.00 35,300.00 2039 363,000.00 18,150.00

$ 220,140,035.25 $ 105,377,635.56 $ 17,602,000.00 $ 6,952,963.75

*Includes Capital Appreciation Bonds.

The above schedule does not include interest on the Essex County Improvement Authority Pool Loan Program Bonds which is calculated by the Authority on a monthly basis.

B-34

10. MUNICIPAL DEBT (Continued)

General Capital and Water Utility Bonds (Continued)

Certain maturities of the $40,747,035.25 General Obligation Refunding Bonds (Pension Refunding) were sold as Capital Appreciation Bonds which are not subject to optional redemption. Interest is paid upon maturity. Below is the debt service schedule:

Year Principal Interest Total

2022 $ 988,217.30 $ 2,301,782.70 $ 3,290,000.00 2023 976,810.65 2,508,189.35 3,485,000.00 2024 967,831.35 2,727,168.65 3,695,000.00 2025 957,922.20 2,957,077.80 3,915,000.00 2026 947,049.60 3,197,950.40 4,145,000.00 2027 937,321.65 3,457,678.35 4,395,000.00 2028 928,532.85 3,726,467.15 4,655,000.00 2029 920,525.55 4,014,474.45 4,935,000.00 2030 912,112.00 4,317,888.00 5,230,000.00 2031 903,130.80 4,636,869.20 5,540,000.00 2032 896,877.30 4,973,122.70 5,870,000.00 2033 890,704.00 5,329,296.00 6,220,000.00

$ 11,227,035.25 $ 44,147,964.75 $ 55,375,000.00

New Jersey Environmental Infrastructure Trust Loan Payable – Sewer Utility Fund

Loan agreements were entered into by the City of Newark with the Department of Environmental Protection for the purpose of improvements to the Waste Water Treatment Plant. Loans outstanding at December 31, 2014 are detailed as follows:

Trust Loan $ 26,065,000.00 Fund Loan 48,777,796.30

$ 74,842,796.30

It is noted that the fund loan was issued interest-free.

B-35

10. MUNICIPAL DEBT (Continued)

New Jersey Environmental Infrastructure Trust Loan Payable – Sewer Utility Fund (Continued)

A schedule of principal and interest on the loans is as follows:

Cash .asis Fund Loan Year Total Principal Interest Principal

2015 $ 6,417,934.33 $ 1,960,000.00 $ 1,164,156.26 $ 3,293,778.07 2016 6,157,096.54 1,445,000.00 1,068,075.82 3,644,020.72 2017 6,162,578.85 1,520,000.00 1,001,568.76 3,641,010.09 2018 6,146,143.56 1,585,000.00 929,056.26 3,632,087.30 2019 6,117,984.28 1,660,000.00 852,518.76 3,605,465.52 2020 6,124,039.80 1,735,000.00 780,293.76 3,608,746.04 2021 6,074,062.95 1,755,000.00 703,506.26 3,615,556.69 2022 6,093,647.74 1,850,000.00 621,531.25 3,622,116.49 2023 6,038,202.03 1,900,000.00 536,306.26 3,601,895.77 2024 6,034,106.14 1,985,000.00 452,112.50 3,596,993.64 2025 5,973,504.11 2,050,000.00 362,346.26 3,561,157.85 2026 4,477,196.13 1,625,000.00 274,175.00 2,578,021.13 2027 4,442,955.96 1,685,000.00 203,887.50 2,554,068.46 2028 2,226,241.79 955,000.00 132,737.50 1,138,504.29 2029 2,231,042.08 1,000,000.00 92,537.50 1,138,504.58 2030 1,375,548.26 660,000.00 50,437.50 665,110.76 2031 664,755.74 225,000.00 21,737.50 418,018.24 2032 663,005.74 230,000.00 14,987.50 418,018.24 2033 692,522.42 240,000.00 7,800.00 444,722.42

$ 84,112,568.45 $ 26,065,000.00 $ 9,269,772.15 $ 48,777,796.30

Capital Lease Program

The City has entered into various agreements with the Essex County Improvement Authority to be a participant in the Capital Equipment Lease Program and the Sportsplex Program. Funds were allocated to the City which are detailed as follows:

Date Description Amount

March 15, 1994 Guarantee Lease Revenue Bond $ 1,500,000.00 June 1, 1997 Sportsplex Revenue Bonds 11,170,000.00 2010 Building Capital Lease Program 74,080,000.00 $ 86,750,000.00

B-36

10. MUNICIPAL DEBT (Continued)

Capital Lease Program (Continued)

A schedule of principal and interest payments for the leases as of December 31, 2014 are as follows:

Total Debt Year Service Principal Interest

2015 $ 1,551,708.13 $ 795,000.00 $ 756,708.13 2016 1,549,623.13 835,000.00 714,623.13 2017 1,555,760.63 885,000.00 670,760.63 2018 1,554,285.63 930,000.00 624,285.63 2019 1,550,460.63 975,000.00 575,460.63 2020 1,549,285.63 1,025,000.00 524,285.63 2021 1,260,498.13 790,000.00 470,498.13 2022 1,238,377.50 810,000.00 428,377.50 2023 1,244,629.38 860,000.00 384,629.38 2024 1,238,326.88 900,000.00 338,326.88 2025 1,554,737.50 1,265,000.00 289,737.50 2026 1,599,686.88 1,375,000.00 224,686.88 2027 1,599,195.63 1,445,000.00 154,195.63 2028 895,043.75 815,000.00 80,043.75 2029 891,346.88 855,000.00 36,346.88

$ 20,832,966.31 $ 14,560,000.00 $ 6,272,966.31

The above-mentioned leases are not reflected on the financial statements herein.

Bond Anticipation Notes

Outstanding Bond Anticipation Notes were issued at various rates and are summarized as follows:

Original Issue Amount

General Capital Fund: Tax Appeal Refunding Bond 12-03-08 $ 1,356,704.00 Various Capital Improvements 12-14-11 31,807,147.00 Tax Appeal Refunding Bond 12-29-11 1,953,405.00 Various Capital Improvements 06-28-12 19,034,143.00 Various Capital Improvements 06-28-13 3,358,902.00 Various Capital Improvements 06-24-14 2,472,808.00 Tax Appeal Refunding Bonds 12-08-14 8,005,891.00

$ 67,989,000.00

B-37

10. MUNICIPAL DEBT (Continued)

Bond Anticipation Notes (Continued)

Statutory requirements for providing sums equivalent to legally payable installments for the redemption of notes (Budget Appropriations) and permanent funding (Bond Issues) are summarized as follows:

Original Legal Permanent Note Installment Funding Required Issued Due as of May 1

2008 2011 - 2018 2019 2011 2014 - 2022 2023 2012 2015 - 2023 2024 2013 2016 - 2024 2025 2014 2017 - 2015 2026

Bonds and Notes Authorized but Not Issued

There were Bonds and Notes Authorized but Not Issued in the following amounts:

Balance Dec. 31, 2014

General Capital Fund: General Improvements $ 35,147,488.89

Water Utility Capital Fund: General Improvements $ 36,179,250.74

Sewer Utility Capital Fund: General Improvements $ 33,469,130.00

11. SCHOOL DEBT

The Board of Education of the City of Newark was a Type I School District and the school debt, authorized by the Board of School Estimate, are obligations of the City and school debt service is raised as part of the school tax levy. School debt is reported on the balance sheet of the General Capital Fund and is detailed as follows:

$20,390,000, 2008 Refunding School Bonds due in annual installments of $4,875,000 to $5,340,000 through September 2017, interest at 5.00%. $ 15,365,000.00

$82,555,000, 2002 Refunding School Bonds due in annual installments of $3,050,000 through March 2015, interest at 5.375%. 3,050,000.00

$43,917,000, 2010 General School Bonds due in annual installments of $1,000,000 to $6,095,000 through June 2025, interest at 3.00% to 5.00%. 43,917,000.00

$ 62,332,000.00

B-38

11. SCHOOL DEBT (Continued)

The Board of Education of the City of Newark is presently a Type II School District. The members of the Board of Education are elected by the voters of the school district on the third Tuesday in April. At each annual school election the Board of Education shall submit to the voters of the district the amount of money fixed and determined in its budget, excluding interest and debt redemption charges, to be voted upon for use of the public schools of the district for the ensuing school year.

School debt is deductible up to the extent of 8.0% of the Average Equalized Assessed Valuations of real property for the Local School Debt.

Bonds and Notes Authorized but Not Issued

There were Bonds and Notes Authorized but Not issued in the following amount:

Balance Dec. 31, 2014

School $ 13,726,000.00

Bond Anticipation Notes

There were no outstanding Bond Anticipation Notes as of December 31, 2014.

12. INTERFUND RECEIVABLES AND PAYABLES

As of December 31, 2014, interfund receivables and payables that resulted from various interfund transactions were as follows:

Due from Due to Other Funds Other Funds

Current Fund $ 18,716,526.22 $ 14,182,404.32 Federal and State Grant Fund 121,468.70 13,094,866.53 Assessment Trust Fund 278,732.29 Animal Control Trust Fund 1,921.08 Other Funds 3,695,077.08 29,192.57 Insurance Fund 350,353.91 5,347.85 Grant Trust Fund 299,211.15 121,468.70 Payroll Agency Fund 218,893.61 60,635.54 General Capital Fund 1,428,536.65 Water Operating Fund 9,659,493.43 Water Capital Fund 2,634.69 1,544,982.87 Sewer Operating Fund 1,617,497.80 2,901,882.66 Sewer Capital Fund 4,410,439.02

$ 36,388,425.53 $ 36,353,141.14

B-39

13. DEFERRED CHARGES TO BE RAISED IN SUCCEEDING YEARS BUDGETS

Certain expenditures are required to be deferred to budgets of succeeding years. The deferred charges as of December 31, 2014 are as follows:

Balance Required for Dec. 31, 2014 2015 Budget

Current Fund: Liability Payout $ 2,800,000.00 $ 1,400,000.00 Hurricane Sandy Costs 3,900,000.00 1,300,000.00 Expenditures Without an Appropriation 404,480.16 404,480.16 Overexpenditures of Appropriations 273,208.73 273,208.73

$ 7,377,688.89 $ 3,377,688.89

Deficit in Operations - 2013 $ 27,109,087.59 $ 3,012,121.00 *

Deficit in Operations - 2014 $ 22,419,737.19 $ 2,235,333.00

Sewer Operating Fund: Deficit in Operations $ 1,594,778.89 $ 1,594,778.89

*The City received approval from the State Local Finance Board for a ten (10) year amortization.

14. DEFERRED COMPENSATION PLAN

The City of Newark offers its employees a Deferred Compensation Plan created in accordance with the provisions of N.J.S. 43:15B-1 et seq., and the Internal Revenue Code, Section 457. The plan, available to all municipal employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency.

Statutory and regulatory requirements governing the establishment and operation of Deferred Compensation Plans have been codified in the New Jersey Administrative Code under the reference N.J.A.C. 5:37.

The “Small Business Job Protective Act of 1996” revised several provisions of Section 457 of the Internal Revenue Code. A provision of the act required that all existing plans be modified to provide that the funds be held for the exclusive benefit of the participating employees and their beneficiaries. The City of Newark authorized such modifications to their plan by resolution of the City Council.

The Administrators for the City of Newark Deferred Compensation Plan is the Great-West Life Assurance Company and the MetLife Companies.

B-40

15. RISK MANAGEMENT

The City of Newark maintains self-insurance programs for General Liability, Automobile and Worker’s Compensation. These programs are funded through budget appropriations from the Current, Water and Sewer Utility Funds.

In addition, the City is self-insured with respect to State Unemployment Compensation. A summary of activity is detailed as follows:

Balance Balance Dec. 31, 2013 Increase Decrease Dec. 31, 2014

Worker's Compensation $ 1,614,153.65 $ 7,802,270.77 $ 6,672,479.51 $ 2,743,944.91

Liability Fund 9,540,698.06 3,956,052.18 4,284,603.49 9,212,146.75

State Unemployment 2,792,298.05 1,029,435.95 1,148,541.03 2,673,192.97

16. CONTINGENT LIABILITIES

A. Arbitrage Rebate Calculation

In 1986, under the Tax Reform Act, the arbitrage rebate law went into effect requiring issuers of tax exempt debt obligations to rebate to the Federal Government all of the earnings in excess of the yield on investments of proceeds of such debt issuances (the “rebate arbitrage”). During 1989 the City issued tax exempt debt obligations subject to arbitrage rebate. The Rebate Regulations require the calculation of rebatable arbitrage by analyzing the cash flows of the proceeds of an issue and “future valuing” the investment cash flows at an interest rate equal to the yield on the issue. The Rebate Regulations apply to obligations issued after August 31, 1986. The arbitrage rebate liability must be calculated every installment computation date (last day of the fifth bond year) or earlier if the bonds are retired, defeased or refunded and pay at least 90% of the rebatable arbitrage (plus any earnings thereon) within 60 days after such date. The City does not calculate their arbitrage rebate liability each year. During 2008, the City authorized a contract with an outside consultant to perform arbitrage calculations, however, as of the date of this audit a copy of this report has not been provided.

B. Compensated Absences

The City’s policy for accrued sick and vacation benefits is as follows:

Every permanent employee is granted a maximum of 23 vacation days per year based on years of service. An employee applying for retirement is entitled to vacation time in the current year and vacation accrued from the preceding year. Vacation time, with approval, may be carried over only one year. If not used, it is then lost.

Every permanent employee is granted one (1) day of sick leave for each month of service up to December 31st for the first year of employment, and fifteen (15) days per year after that. Unused sick leave can be accumulated and may be converted into cash upon retirement, depending upon labor contract provisions of the job title.

A separate contract exists with the Police and Fire personnel for vacation and sick time.

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16. CONTINGENT LIABILITIES (Continued)

B. Compensated Absences (Continued)

Generally, the City requires employees with accumulated vacation, holiday, personal and compensatory leave credits to extend their separation dates beyond their last working day in order to exhaust all such accumulated time. Replacement personnel are hired only after position is no longer encumbered. Where circumstances warrant lump sum payment (for such accumulated credits) at time of separation, position remains unavailable for hiring until such time as that expenditure is amortized over the period had the employee remained on the payroll beyond his last working day as above. Sole general exception is payment for unused sick leave which is distributed to eligible nonuniformed employees only upon retirement.

City officials have determined that the sum of $51,398,195.65 has accumulated for unused sick and vacation pay and would be due to employees upon their retirements. This amount has not been verified by audit.

The sum, considered as a contingent liability, is not carried on the Financial Statements of the City.

C. Tax Appeals

As at December 31, 2014, there are Property Tax Appeals in the Tax Court of New Jersey against the City involving commercial, industrial and residential properties. It is impracticable for the City to describe each of the appeals that are currently pending against the City. The City vigorously defends each of these appeals through extensive discovery, settlement negotiations and, if necessary, trial. At this point it is impossible to specifically quantify the extent of any potential exposure to the City relating to these appeals. There should be no substantial additional impact upon the financial status of the City.

Judgments, adverse to the City, would apply to the year of appeal plus at least two subsequent years. Refunds or tax credits, including statutory interest thereon, would be chargable to operations or future budget appropriations.

County taxes paid on the reductions in assessed valuations are subject to credits against the County Tax Levy of the year subsequent to the year in which appeals were adjudicated.

D. Federal and State Awards

The City participates in several federal and state grant programs which are governed by various rules and regulations of the grantor agencies; therefore to the extent that the City has not complied with the rules and regulations governing the grants, refunds of any money received may be required and the collectibility of any related receivable at December 31, 2014 may be impaired.

E. Litigation

The following is based on the opinion of the City’s legal counsel (Corporate Counsel):

The City, and in some instances, its officers or employees in their official capacities, is a defendant in a number of lawsuits which may be categorized as follows:

a. Negligence Actions - There are presently lawsuits alleging tortuous conduct and claiming damages against the City that are being defended by the Office of Corporation Counsel or contracted Outside Counsel. The City is self-insured and there are appropriate reserves sufficient to cover losses based on experience. To the knowledge of the Corporation Counsel, there is no threat of exposure outside of the self-insurance program.

b. Contract Actions/Public Bidding - There are presently lawsuits based upon breach of contractual obligations against the City and defended by the Office of Corporation Counsel or contracted Outside Counsel. In all cases, the City is self-insured and there are appropriate reserves sufficient to cover losses based on experience, and to the knowledge of the Corporation Counsel or contracted Outside Counsel, there is no threat of exposure outside of the self-insurance program.

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16. CONTINGENT LIABILITIES (Continued)

E. Litigation (Continued)

c. Prerogative Writ Cases – There are prerogative cases challenging municipal action against the City and defended by the Office of Corporation Counsel. It does not appear that any of these actions will have a materially adverse impact on the City.

d. Water and Sewer Utility – The City is not a defendant in any suit concerning requirements for the installation or the financing or operation of sewer and water utilities or other improvements or with respect to any land use questions whereby the outcome would have any materially adverse effect upon the financial status of the City.

e. Condemnations – The Office of the Corporation Counsel is not aware of any pending condemnation cases in which the City is a party.

f. Tax Foreclosure – The City conducted an In Rem Foreclosure in 2007, 2011 and 2014. The City and Outside Counsel are defending some cases arising out of the 2007, 2011 and 2014 In Rem Foreclosures. The Office of Corporation Counsel is currently unaware of any foreclosure litigation presently pending or threatened that would have a materially adverse impact on the financial or economic position of the City, if adversely decided.

g. Labor and Employment Matters – There are various labor and employment matters pending against the City and defended by the Office of Corporation Counsel or contracted outside counsel. In all cases, the City is self-insured and there are appropriate reserves sufficient to cover losses based on experience. To the knowledge of Corporation Counsel, there is no threat of exposure outside of the self-insurance program.

The Office of Corporation Counsel is currently unaware of any litigation presently pending or threatened in any manner questioning the authority or the proceedings for the levy or the collection of taxes, and neither the corporate existence, nor the boundaries of the City, nor the title of any of the present officers thereof to their respective offices is being contested.

17. POTENTIAL LIABILITY

In the City’s Memorandum of Understanding (MOU) with the State of New Jersey, under the caption “Required to Reimburse the State Under Certain Conditions”, it states “that to ensure that aid provided in 2012 is not again in excess of the Municipality’s needs and the Municipality shall be required to appropriate as a repayment to the State in its 2013 Budget all funds above $10,000,000.00 that are available to be used as revenue in support of the 2013 Budget according to the 2012 Annual Unaudited Financial Statement”. The City’s 2012 Annual Unaudited Financial Statement indicated a Fund Balance of $12,959,747.74 and the City anticipated the sum of $12,904,747.74 in the 2013 Budget as revenue. We did not see the amount of $2,959,747.74 set up in the 2012 Annual Unaudited Financial Statement as a liability or in the 2013 Budget as an appropriation in accordance with MOU.

The 2012 Audit reflects a Fund Balance of $11,411,387.66. The sum of $1,411,387.66 has not been set up as a liability as of December 31, 2012 since the State approved the 2013 Budget without an appropriation or a liability for the amount in excess of $10,000,000.00. No provision has been made in the 2013 nor the 2014 audits for the above amount.

The proposed 2015 budget does not include approximately $19.4 million in prior year healthcare related expenses that were not included in the adopted budgets of the previous City administration. The City has entered into negotiations with its healthcare provider to reduce these expenses or produce a multi-year payment plan with respect to such expenses. The City may also finance such expenses as emergency temporary appropriations with emergency notes and pay down such emergency notes over time with refunding obligations. Financing would be subject to Local Finance Board approval. Absent a reduction, multi-year payment plan or Local Finance Board approval of any financing with respect to these expenses, the City may be required to include these expenses in its adopted 2015 budget.

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18. SUBSEQUENT EVENTS

The City of Newark has evaluated subsequent events that occurred after the balance sheet date, but before June 26, 2015. No items were determined to require disclosure.

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APPENDIX C FORM OF LEGAL OPINION

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APPENDIX D FORM OF CONTINUING DISCLOSURE CERTIFICATE

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